Competition, efficiency and soundness in European life insurance markets

Cummins, J. David; Rubio-Misas, Mar�a; Vencappa, Dev

Abstract

This paper provides cross-country evidence on the association between soundness and competition in the life insurance industry, where competition is measured by the Boone indicator. We analyze 10 European Union (EU) life insurance markets over the post-deregulation period 1999-2011. The results indicate that competition increases the soundness of the EU life insurance markets. Since the Boone indicator measures competition based on the reallocation of profits from inefficient insurers to efficient ones, our results suggest that efficiency is the mechanism through which competition contributes to insurer solvency. The soundness-enhancing effect of competition is greater for weak insurers than for healthy ones.

Citation

Cummins, J. D., Rubio-Misas, M., & Vencappa, D. (2017). Competition, efficiency and soundness in European life insurance markets. Journal of Financial Stability, 28, https://doi.org/10.1016/j.jfs.2016.11.007

• Journal Article Type: Article
• Acceptance Date: Nov 22, 2016
• Online Publication Date: Nov 25, 2016
• Publication Date: Feb 28, 2017
• Deposit Date: Mar 16, 2017
• Publicly Available Date: Mar 16, 2017
• Journal: Journal of Financial Stability
• Print ISSN: 1572-3089
• Electronic ISSN: 1572-3089
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 28
• DOI: https://doi.org/10.1016/j.jfs.2016.11.007
• Keywords: Competition, Soundness, Boone indicator, European life insurers, Financial crisis
• Public URL: https://nottingham-repository.worktribe.com/output/843509
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S1572308916301760
• Contract Date: Mar 16, 2017