Non-life insurance markets in CEE countries– part I: Products’ structure

Abstract

IntroductionInsurance remains a relevant contributor to the economic growth. It offers a reduction of anxiety and more effective management of risk as well as promotes financial stability by mobilisation of savings and more efficient capital allocation [Outreville 1990; Skipper 1997; Liedtke 2007; Han et al. 2010, p.184-185; Albouy & Blagoutine 2011, p.467-469; Haiss & Sumegi 2008; Curak, Loncar & Poposki 2009]. However, the contribution of the insurance sector to the economy depends on the development of the insurance system, which is sensitive to many factors. In particular, from a macro perspective, the development of a giv- en national non-life insurance market is influenced by favorable or unfavorable economic conditions and globalization processes that release the flow of capital and spread of knowledge. Another area of influence is represented by riskspecific conditions. For example, natural catastrophes have a power to enhance the cyclicality of an insurance market, followed by changes of insurance premiums and availability of coverage. The behavior of insurance consumers is also a relevant factor, with changing attitudes to the need of insurance protection in the first place. It is worth to note that the development of the non-life insurance sector is also related to the situation of real estate, motor and bank loan markets.If considering the European Union countries, the current state of the development of the national non-life insurance markets differs significantly. In particular, there is a group of transition countries which are specific due to some aspects of the non-life market development. The purpose of this study is to evaluate these changes in a group of the eight transition countries from the region of Central and Eastern Europe (CEE). This study contributes to the existing academic debate as there is a clearly identifiable research gap within crossnational studies on the performance of non-life insurance markets. The available cross-country comparative studies usually address the whole insurance sector (aggregated data), which is discussed further in the first section of this paper. By addressing exclusively the situation of the non-life markets, the evaluation provided in this study offers an insight into a segment of insurance market which is of particular importance for companies and households.Additionally, it should be noted that the studies on the development and contribution of the insurance sector in transition countries, also remain rare in academic literature. Such studies gain considerably lower attention, when compared to other aspects of financial system performance (banking sector or capital markets). This cognitive gap may be at least partially fulfilled by this study, as it deepens some relevant aspects related to the performance of non-life markets in selected CEEs as transition economies. Non-life insurance markets in CEE countries remain specific in some aspects, although they overcame considerable changes, stimulated by the process of harmonization with the European Union. In this context, the problems subject to closer evaluation in this study correspond with three broad areas of concern. The first is presented in this paper (as the first part of the study) and addresses the market structure from a product-oriented point of view. The second area of concern refers to the polarization of insurance markets from a cross-country comparative perspective, whereas the third focuses on market concentration. The latter two aspects will be discussed in a separate paper (as the second part of this study).The paper is organized as follows. The first section provides an overview of the accessible previous research related to the development of insurance markets in the transition countries. The second section of the paper presents the design of research and its methodology. In particular, it explains the adopted approach to the study structure, selection of sample, sources of data, as well as the timeframe of analysis. …