Dependence relationship between insurance demand and some economic, financial, and socio-demographic factors: Evidence from different groups of European countries

This study investigates the interaction between insurance penetration on the development of the financial system in Nigeria covering the period 2003 to 2023. The main purpose of the paper is to find out the responsiveness of the insurance penetration to the development of the financial system in Nigeria. Financial development broken down into bank development (Credit to the Private Sector divided by Gross Domestic Product) and institutional development (money supply divided by Gross Domestic Product) served as the independent variables while insurance penetration served as the dependent variable. An array of preestimation tests were used to determine the goodness of the used dataset and the adopted methodology is the Autoregressive Distributed Lag Model form of regression analyses. Findings arising from this study indicate that financial development enhances insurance penetration while the regulatory environment controlled for by monetary policy rate also favourably affects insurance penetration. This implies that the interconnectedness of the sectors of the financial system should be explored for the imperatives of overall developemnt of the financial system.

Unlike the banking sector, whose impact on systemic risk has been amply proven, it remains unclear whether the insurance business constitutes a source of systemic risk. The aim of this chapter is to contribute to the debate and attempt to answer this question by examining the role of insurance companies in the financial system, the existing interconnections between insurance operators, and the vulnerability factors, i.e. the elements that increase the exposure of institutions to systemic risks. In recent years, attention to systemic risk has been focused on the insurance sector and the financial activity of insurance companies, which depends heavily on the performance of the financial markets as well as the phenomenon of bancassurance in the search for new investment methods, which inevitably increases the transmission channels of systemic risk. From this perspective, the insurance sector is significant in the network of financial relations and in the global economic system where a crisis can certainly cause systemic effects and repercussions due to the highly interconnected financial activities in place. The International Association of Insurance Supervisors (IAIS) in the Global Insurance Market Report (GIMAR) of 2022 highlights how systemic risk in the global insurance sector is still moderate overall, albeit with an upward trend in insurers’ scores due to increased illiquid exposures and assets, over-the-counter derivatives, short-term loans and intra-financial assets. The role of regulators and supervisory authorities is crucial in this context. Therefore, the chapter analyses both the main and most recent European regulatory and supervisory interventions in the field of systemic risk management in insurance and the possible macro- and micro-systemic supervisory tools envisaged for the insurance sector. Based on the data available on the Acharya Volatility Lab (V-Lab) website and the Bureau van Dijk Orbis database, the insurance sector is explored in terms of systemic risk management and in relation to the global economic and financial system.

In recent years, the rapid rise of internet finance has promoted the development of the finance in China.As a useful complement to the financial system and the exploration of financial innovation, internet finance has put forward new challenges to financial regulation.This paper firstly gives the concept of internet finance, and then analyzes the principles and patterns of internet financial regulation to provide some references for the healthy development of internet finance in China. Concept of Internet FinanceInternet finance refers to the new financial business model which applies the internet technology and information technology to achieve financial intermediation, payment, investment and information intermediary services by the traditional financial institutions and internet companies.Internet finance is not a simple combination of the internet and the financial industry.It is the new model and new business generated naturally by the technology of security, mobile and other network technology.Internet finance is a combination of traditional financial industry and Internet technology emerging areas.In recent years, China's internet development speed is very fast, which also led to the other industry change in many industries rely on the platform of the Internet, in a certain industry of Internet financial reform the produce is an inevitable trend in the development of the Internet.Internet financial market is conducive to improving the living standards of the masses.However, in the process of the development of internet finance, due to factors such as network technology, often some of the traditional financial fields to participants in the internet financial cause certain risks and losses.As is known to all, the Internet financial threshold is very low, for investors and lenders not very strict review system.In order to make the Internet financial health and stable development, to the financial market brings more convenience.We need to strengthen internet finance supervision in the process of supervision must abide the actual situation of Internet finance.We should grasp certain regulatory principles in order to adapt to the internet financial development trend to realize a better internet finance development. Regulation Principles of Internet FinancePrinciple of Moderate Regulation.Moderate regulation refers to the effective and limited supervision of financial activities, which is under the premise of respecting the self-regulation of the market.In order to meet the requirements of the appropriate regulatory, regulators should be to respect the law of financial market.Should not be contrary to the market force; try to avoid direct microscopic control.Moderate supervision is a trend of the current financial regulation, Internet banking as a kind of financial innovation.Appropriate regulatory principles have been given more

PurposeThis paper aims to analyze systemic risk in and the effect of capital regulation on the European insurance sector. In particular, the evolution of an exposure measure (SRISK) and a contribution measure (Delta CoVaR) are analyzed from 1985 to 2016.Design/methodology/approachWith the help of multivariate regressions, the main drivers of systemic risk are identified.FindingsThe paper finds an increasing degree of interconnectedness between banks and insurance that correlates with systemic risk exposure. Interconnectedness peaks during periods of crisis but has a long-term influence also during normal times. Moreover, the paper finds that the insurance sector was greatly affected by spillovers from the process of capital regulation in banking. While European insurance companies initially at the start of the Basel process of capital regulation were well capitalized according to the SRISK measure, they started to become capital deficient after the implementation of the model-based approach in banking with increasing speed thereafter.Practical implicationsThese findings are highly relevant for the ongoing global process of capital regulation in the insurance sector and potential reforms of Solvency II. Systemic risk is a leading threat to the stability of the global financial system and keeping it under control is a main challenge for policymakers and supervisors.Originality/valueThis paper provides novel tools for supervisors to monitor risk exposures in the insurance sector while taking into account systemic feedback from the financial system and the banking sector in particular. These tools also allow an evidence-based policy evaluation of regulatory measures such as Solvency II.

Since the outbreak of the global financial crisis, forestalling and defusing systemic financial risks has been a hot topic of social concerns. In China, with constant development and innovation of the financial system, higher level financial deepening and openness, and economic downside pressure under new normal” economy, risk-prevention becomes much more complicated. In this case, the financial system should better serve the real economy, reduce financial risks and deepen financial reforms—three tasks of China’s financial work. The report of the 19th National Congress of the Communist Party of China further emphasized that the government should improve the financial regulatory system to forestall systemic financial risks. Therefore, ensuring China’s financial stability and preventing systemic risks have become the priority and major challenges for China’s financial regulatory authorities. Accurate measurement of systemic risks is the basis for risk prevention, the improvement of financial regulations, and any effective regulatory actions. However, existing domestic studies measure financial institutions’ systemic risks from only one aspect—systemic risk contribution or systemic risk exposure, and lack a clear distinction between the two measures in theoretical and policy implications. Some scholars even use systemic risk exposure metrics to measure the systemic risk contribution of financial institutions and assess its systemic importance. Actually, the aggregate risks of financial institutions include both risk contribution and risk exposure—the former focuses on systemic importance while the latter underlines systemic vulnerability, so we should take both sides into risk measurement. This paper uses ΔCoVaR and Exposure-ΔCoVaR to comprehensively measure the systemic risks of financial institutions from both sides—systemic importance and systemic vulnerability. This paper finds no significant correlation between the systemic importance and vulnerability of financial institutions in the cross-sectional dimension, but significant correlation in the time-series dimension, which means the systemic importance and vulnerability of financial institutions change simultaneously and periodically. The results imply that, in China, the systemic importance of bank and insurance industry exceed that of securities industry, while the latter’s systemic vulnerability exceeds that of the former. These differences exist persistently in the time-series dimension. The big four” banks have high systemic importance but low systemic vulnerability, while a handful of financial institutions have both significantly high systemic importance and vulnerability. Furthermore, the size of financial institutions’ asset is an important influencing factor of systemic importance, and the leverage is an important influencing factor of systemic vulnerability, while the margin trading of securities has a significant positive effect on systemic vulnerability but no significant effect on systemic importance. This paper accurately measures the systemic risks of 33 listed financial institutions in China from two aspects—risk contribution and risk exposure, and makes a precise assessment on their systemic importance and vulnerability. We also investigate the influencing factors of financial institutions’ systemic importance and vulnerability. These findings help to understand the systemic risks of China’s financial institutions in cross-sectional and time-series dimensions and correct some wrong perceptions in existing academic studies, and further provide useful empirical references and policy suggestions to China’s financial regulatory authorities to forestall systemic risks and improve macro-regulation. The policy implications of the results are mainly reflected in the following three aspects. First, regulators need to select targeted regulatory objectives and policy tools to make differential regulations based on the features of institutions in systemic importance and vulnerability. Second, different institutions are different in systemic importance and vulnerability, so regulatory authorities should pick out key financial institutions through their performance in systemic importance and vulnerability, and enhance the supervision of key institutions. Third, financial regulators are able to choose proper and effective regulatory tools according to the main drivers of systemic importance and vulnerability.

The aim of this paper is to understand which factors affect crop insurance decision in France and in Italy. These neighbor countries are characterized by a changing insurance system from a public fund to private policies which are highly subsidized. Despite the stakes related to crop insurance - CAP reform, size of the market, implication of the governments -, few studies have been drawn on this topic. The literature in finance and in agricultural economics allows to build a two-stage empirical model which computes the elasticities of demand for crop insurance, and to define its key determinants. It appears that France and Italy present similar insurance systems in terms of products and of ability to indemnify. However, the farmers' sensitivity to insurance is most contrasted across the Alps. This leads to a discussion about the creation of an insurance market at the European scale.Keywords: Crop insurance, Insurance demandJEL Classification: G22, Q14IntroductionThe management of risk in agriculture and the role of insurance long have been the centre of attention for researchers and policymakers. A review of the literature on the subject consistently shows the failure of private markets for comprehensive (multiperil) agricultural insurances and their unsustainability in the absence of any public intervention. Even with strong public support, insurance demand is not often as high as could be expected.Reasons for such failures are usually found in either supply or demand conditions. On the supply side, the most explored issues are asymmetric and incomplete information (Chambers 1989; Miranda 1991; Mahul 1999; Just, Calvin and Quiggin 1999; Bourgeon and Chambers, 2003), with the resulting problems of adverse selection, moral hazard and systemic risk. This may pose the most serious obstacle to the emergence of an independent private comprehensive crop insurance industry. Especially due to the systemic character of yield risks, reinsurance becomes very expensive. Without government subsidies or public reinsurance, insurers pass this high cost to the farmers' premiums (Doherty and Dionne 1993; Miranda and Glauber 1997; Mahul 2001).On the demand side, the inability of farmers to assess precisely the benefits derived from agricultural insurances is often cited as one possible reason for limited demand (Garrido and Zilberman 2008). Another explanation for the limited interest in multiperil crop insurance is simply that the organizational structure of farming is such that farmers can use other private instruments - such as product diversification, credit, financial markets, and so on - to manage risk and therefore that the potential demand for crop insurance is lower than commonly believed (Wright and Hewitt 1994). We can also consider that massive government intervention in developed countries may also crowd out private markets.Knowledge of factors affecting farmer purchases of crop insurance is essential for evaluating the soundness and profitability of insurance programs and the pertaining public support (Goodwin and Smith 1995). In spite of its importance, the demand for crop insurance has received little empirical attention in literature, mainly devoted for investigation focused on North American area. Gardner and Kramer (1986); Niewoudt et al. (1985); and Barnett et al. (1990) found that the expected rate of return to insurance was an important factor in determining the demand for insurance. Lower attention has been devoted to the possible impact of financial issue on this field (Enjolras and Sentis 2011).Currently, for the European countries this lack of empirical evidence is exacerbated (Capitanio and Adinolfi, 2009). With this preliminary remarks, carrying out this analysis we wish to point out which factors could affect crop insurance decision in France and Italy, taking into account both agricultural and financial variables (De Castro et al, 2011)The first part of this paper is devoted to a presentation of the French and Italian insurance systems. …

Does COVID-19 matter for systemic financial risks? Evidence from China's financial and real estate sectors

Environmental performance, financial development, systemic risk and economic uncertainty: What are the linkages?

Insurance sector is one of the key pillars of the financial services sector and is also central element of the trade and development matrix. A well-functioning insurance sector plays a crucial role in economic development not only at macro-economic levelbut also in terms of the activities of businesses and individuals. A well-functioning insurance sector is a vital piece of nationalinfrastructure. The potential and performance of the insurance sector is universally assessed with reference to two parameters, viz., insurance penetration and insurance density. These two are often used to determine the level of development of theinsurance sector in a country. The present study examines the insurance penetration and density in Indian and also examinesthe global picture of Insurance penetration and insurance density for the period 2001–2013. The purpose of this paper is toestablish the correlation between insurance and economic growth in India, by taking into consideration the share of grosspremium written to GDP (insurance penetration), and the average value of the insurance premium paid by an inhabitantacross one year (insurance density), as insurance indicators. The study shows that insurance penetration and economicgrowth shows a strong linear relationship. The results obtained will be compared with those obtained on other markets.

With the global deterioration of ecology and the widening of inequality, achieving green, inclusive and sustainable economic growth has received worldwide recognition. The essence of green transition is the revolution of development mode, which requires a large amount of environmental investment, including enterprise pollution control and green RD on the other hand, the supply capacity of green funds by the financial sector also needs to be improved, so as to reduce the environmental financing constraints faced by enterprises. Therefore, financial development and environmental regulations can produce synergy at both ends of supply and demand of environmental investment and have a coordination effect on green economic transition. This paper exploits a comprehend dataset on the information of industrial production, pollution emission and green innovation of 284 cities in China from 2004 to 2015 to test the coordination effect. In recent years, the innovation and development of China’s financial system are reflected in local small financial institutions, in which the development of city commercial banks (CCB) has become an important symbol. With information advantages, more flexible supervision and diversified ownership structure, CCB can reduce information asymmetry in the lending process and alleviate the financing constraints faced by enterprises. Measuring the urban financial development based on the increase in the branches of CCB, this paper finds that local financial development can significantly reduce the industrial SO2 emission, the main pollutant in cities, in coordination with environmental regulations. The mechanism analysis shows that financial development and environmental regulations can synergistically promote industrial pollution control and green technological innovation, which reduces the emission intensity of industrial pollution and promotes the rise of green industry, thus promoting industrial green transition, without significant reduction of production. The conclusions remain stable after a series of endogenous and robustness tests. Heterogeneity analysis also reveals that environmental information asymmetry, the shortage of market intermediary service agency and the weak of the ability of technology commercialization will impair the coordination effect. The contributions of this paper are mainly reflected in two aspects: First, it reveals the factor of financial development in affecting green economic transition, which enriches the existing literature on financing constraints, financial development and economic green transition, and also provides useful policy enlightenment for the development of green economy. It is necessary to not only strictly implement environmental regulations, but also pay attention to the financial support and guidance role of the financial sector, so as to promote enterprises’ pollution control and green R&D innovation. Second, to improve the supply capacity of green funds, China needs to not only deepen the reform of the financial system and make up for the shortcomings existing in the financial system, but also further improve the relevant supporting systems required for the development of green finance, including improving the enterprise environmental information disclosure and sharing mechanism, developing green financial intermediary service agency, and cultivating professional technical management talents, so as to improve the operational ability of green financial business during the supply of green funds.

Measurement and contagion modelling of systemic risk in China's financial sectors: Evidence for functional data analysis and complex network

Microsystemic Regulation: A Perspective on Latin America and the Caribbean

This empirical study analyzes the implications of financial structure for country’s economic development. In recent years a considerable attention is paid to this issue in the scientific literature, however, there is a lack of empirical studies on this issue, especially investigating the relationship between the structure of financial system and economic development. The aim of this paper is to investigate empirical link between the structure of financial system and economic growth in BRICS countries. By applying the pooled mean group estimator to a large panel up to 6 countries over the 1980–2012 periods, this study finds that financial structure is significantly cointegrated to both Financial Development and economic growth. In particular, the relationship is positive in nature, suggesting that more market-based countries enjoy faster economic growth but suffer more from economic fluctuations in the long run. Accordingly, in sharp contrast to the existing evidences, we conclude that the architecture of an economy’s financial system matters for real sector performance. Based on the research results it can also be stated that the relationship between the structure of financial system and economic development exists, i.e. the level of country’s economic development is higher in countries with market-based financial system. It can also can be stated that countries that can be characterized by mixed and market-based financial systems are better economic developed. As policy recommendation, the banking sectors of all the countries must be further developed since its indicator suggest a very significant positive relationship between banks and economic growth. The channel through which credit is given to the private sector must be further enhanced and this can be a policy measure for banks. In conducting this study, we found out that BRICS and Mauritius are more bank-based economies but nevertheless, stock markets also contributed to economic growth. So, a recommendation would be that the stock markets in these countries be given a boost to be developed so as to further enhance economic development, hence helping them to gain more weight on being developed. It can be anticipated that financial development will play a more prominent role in the overall economic performance in the future; however, these economies should be able to get the right mix of their financial structure.

The basic purpose of the financial manager is to maximize the wealth of shareholder by minimizing the risk. This study examines the validity of systematic risk determinants in banking, insurance, and non financial sectors of Pakistan. Panel data is used for the period of 2010 to 2014. Common Effect Model, Generalized Method of Moments and Two step regression model is used to identify the impact. Common effect results identify that leverage; operating efficiency, firm size, and market value of equity have significant impact on systematic risk in the banking sector. Firm size has significant impact on insurance sector, whereas liquidity, leverage, operating efficiency, firm size, market value of equity, profitability, and dividend pay-out are significant variables in the non-financial sector. In pooled data analysis leverage, firm size, market value of equity, and dividend pay-out are significant determinants in Common Effect Model and Two Step. However in GMM indicates that profitability has also positive impact on unsystematic risk in addition to Common effect and two step regression determinants. Policy implication indicates that shareholders and investors can maximize the return at low level of risk by investing in selected portfolios. It is finally concluded that variables significance changes from sector to sector in individual spectrum but in a pooled regression leverage and market value of equity has negative impact on systematic risk, whereas firm size, profitability and dividend pay-out has positive impact on systematic risk.

The fault lines from a major earthquake in Canada could quickly spread through the insurance industry and have a systemic financial impact. Policymakers should take several steps now to avert this chain of events.Since the financial crisis of 2007/08, policymakers have focused on systemic risk to financial and economic systems, with most of the attention on the banking system. The framework for these efforts has been to build resiliency and shock absorbers to minimize the impact of financial shocks on the real economy. The inevitability of an earthquake in Canada poses a similar systemic financial risk for the insurance industry and the economy as a whole, and similar remedial efforts are required.A federal emergency backstop arrangement for property and casualty insurers, properly designed, would minimize the systemic financial impact resulting from such a catastrophic and likely uninsurable event on those affected and on the economy at large. The moral-hazard implications appear small compared to the benefits of avoiding serious systemic risk. The backstop arrangement should, however, apportion costs, including a possible tranche of further contingent risk-sharing with industry in a way that lessens moral hazard issues. A federal last-resort backstop guarantee could kick in beyond an industry-wide trigger of expected losses, say those associated with a one-in-500-year earthquake – currently approximately $30 billion to $35 billion. This loss estimate would be updated periodically, and the trigger could be set somewhere in excess of the one-in-500 threshold to promote further industry risk-sharing.That said, as part of any Canadian reform package, it is important to bolster the Property and Casualty Insurance Compensation Corporation to deal with insurance industry problems and reduce systemic impacts from severe catastrophes. This would also reduce the likelihood that a federal financial commitment would be triggered and, if triggered, would have minimum costs. Having more tools available in advance to deal with catastrophic events would reduce post-catastrophe disaster claims. This Commentary recommends the following:• Strengthen PACCIC so it can intervene before insurance companies in financial difficulty become insolvent.• Ensure PACCIC has the capability to borrow to reduce its liquidity needs in a crisis.• Following these structural changes, PACCIC should rerun its scenario models to examine how much that could increase resilience to extreme events.Furthermore, insurance industry bodies, as well as the federal and provincial governments, should undertake awareness programs to enhance homeowners’ understanding of catastrophe risks. This should encourage Canadians to evaluate the merits of disaster insurance coverage, particularly in the Quebec City-Montreal-Ottawa corridor where such insurance penetration is far too low. Finally, the insurance industry, under active OSFI supervision, should further develop its models for setting aside adequate capital and claims-paying capacity. Regulators should ensure there is an adequate degree of conservatism and that models are as up to date as possible. OSFI should regularly assess the adequacy of major insurers’ models, as they have done in the banking industry.