A strategy of insurance market development in conditions of latent military conflict in Ukraine

Nataliia Valinkevych,Andrii Polchanov,Yevhen Kovalenko

doi:10.21003/ea.v182-02

Abstract

One of the basic preconditions of overcoming economic consequences of the military conflict in the East of Ukraine is a developed financial sector, an integral part of which is insurance market. Considering existence of internal problems of the industry’s development, that are strengthened by influence of military-political instability, the domestic insurance companies cannot fully achieve effective redistribution of risks and capital, as well as provide stability of economic system in the whole. This research is directed to the theoretical justification of a perspective strategy of the insurance market’s development in conditions of latent military conflict as well as to offer the appropriate practical recommendations for Ukraine. In order to achieve the set goal, there was substantiated the necessity of a complex application of the general scientific and special methods of cognition, namely methods of abstraction, analysis, synthesis, grouping, analogy and comparison, as well as the economic-mathematical methods. Basing on the official data on an insurance market’s development in Ukraine, there was revealed a tendency to worsening of its abilities in provision of national financial security, that is confirmed by shortening of volumes of insurance premiums and formed insurance reserves, as well as reduction of ratio of the insurance premiums to GDP and number of population in Ukraine during the last years. Moreover, with the help of instruments of correlation-regressive analysis, there was revealed a dependence of the level of the insurance market’s financial potential usage on the level of insurance penetration in Ukraine in the years 2002-2019. We define economic problems of latent military conflict, which can be solved with the help of insurance market, in particular, a slow economic growth, conditioned by a high level of credit risks, the unresolved issues of responsibilities’ fulfillment by insurance companies in conditions of military conflict and after it, as well as a rapid increase of financial needs of healthcare system. In accordance to this, there were given recommendations concerning their solution, which foresee a priority in medical insurance development, widening of insurance conditions and list of insurance risks, connected with bank crediting, as well as development of new insurance products, considering an influence of a military conflict’s factor. In conditions of overcoming the consequences of military conflict, the transformation of insurance market’s role appears, which is connected with increase of risks level and slowing down of financial resources movement. The proposals, formed as the result of this research, can be useful to develop the perspective plans of Ukrainian insurance market’s development. At the same time, the coordination of actions of the state regulators, unions of market’s participants, owners and management of insurers, as well as consumers of insurance services, are needed.

Highlights

The provision of access to financial services is one of the main direction of the post-conflict reconstruction, especially needed to stimulate a small and medium business development, that creates demand for products and services and provides replenishing of the budgets at expense of taxes and other mandatory payments
As the result of the main indices of development of insurance market of Ukraine during the years of 2008 to 2019 (Figure 1), the significant reduction of the insurance payments’ volumes in the period of the military conflict was revealed, that has the relevant influence on the volumes of the formed insurance reserves and volumes of assets in the whole
A financial potential of insurance market is defined by the volume of the mobilized insurance payments

Summary

Introduction

The provision of access to financial services is one of the main direction of the post-conflict reconstruction, especially needed to stimulate a small and medium business development, that creates demand for products and services and provides replenishing of the budgets at expense of taxes and other mandatory payments. The development of this direction of financial mediation is connected with a growing demand for services that cannot be directly given by the banking institutions. In this regard, the research of the perspectives to develop insurance market of Ukraine in conditions of the post-conflict reconstruction of economy is perspective enough

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Conclusion