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This study applies the bootstrap panel Granger causality test to test whether insurance activity promotes economic growth, using data from 10 OECD countries over the period of 1979-2006. Empirical results indicate that one-way Granger causality running from all insurance activities to economic growth for France, Japan, Netherlands, Switzerland, and the UK, and economic growth Granger causes insurance activities in Canada (for life insurance), Italy (for total and life insurance) and the USA (for total and nonlife insurance). There is a two-way Granger causality between life insurance activity and economic growth in the USA, while no causality between insurance activities and economic growth is found in Belgium (for all insurance), Canada (for total and non-life insurance), Italy (for non-life insurance) and Sweden (for life insurance). Our results also confirm the finding of Ward and Zurbruegg [Does insurance promote economic growth? Evidence from OECD economies. Journal of Risk and Insurance 67, showing that the insurance-growth nexus varies across countries, since their paper have previously demonstrated heterogeneity in this vein. In an analysis of a broader, though overlapping 17-country sample and taking into account banking activities, the results suggest the importance of including banking activities when investigating the insurance-growth relationship.

This paper investigates the non-linear link between economic development and activities of the life insurance market. We ask whether the relevance of institutional environments on the development of the life insurance market is different across countries. Applying a novel threshold model with the instrumental variable approach, we find overwhelming evidence in support of an income threshold. Moreover, legal and political circumstances have an overwhelming positive effect on life insurance in low-income countries, but the effect is marginal in high-income countries. Our findings clearly demonstrate that the role of institutions on activities in the life insurance market diminishes with the evolvement of economic development.

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