Insurance Market Development

RELEVANT FACTORS FOR
INSURANCE DEVELOPMENT
Three things emerge from the literature on 
relevant factors for the development of in-
surance markets. First, as noted previously, 
various attempts have tried to link specific 
variables (for example, the legal system, 
governance, enforcement, institutional quali-
ties) to insurance and financial market de-
velopment. Swiss Re (2004) has analyzed 
these factors mostly from the point of view 
of businesses. Among the factors that de-
termine insurance growth are the savings 
level and per capita GDP, which have a 
positive impact on insurance but also benefit 
from the development of insurance markets. 
Enz (2000) studies the relations between in-
surance demand and GDP, highlighting 
many factors (including taxation, regulation, 
and risk coverage provided by the govern-
ment) that limit insurance penetration in the 
market. Greene (1976) and Outreville (1992) 
examine the state’s role in the insurance 
market.
Swiss Re (2004 and 2006) identifies several 
important factors determining growth of the 
insurance business, including the distribu-
tion of wealth, the legal system and property 
rights, insurance product availability, regula-
tion and supervision, trust, and risk aware-
ness. Other non-economic factors that have 
an impact on the development of insurance 
are religion, culture, and education. Specific 
factors are identified for life insurance and 
non-life insurance (see Table 3). For non-
life insurance, they include regulation (for 
example, compulsory coverage), claim 
awards, exposure to natural disasters, and 
the public sector’s role in health. For life 
insurance, they include economic stability 
(for example, inflation and the exchange 
rate), demography, the tax system, the sav-
ings rate, and the pension system. 
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