Does insurance hedge macro volatility? Global evidence

Choi, Paul Moon Sub; Chae, Won Young; Choi, Joung Hwa; Han, Young Bin

doi:10.21511/imfi.14(2-2).2017.02

Investment Management and Financial Innovations

2017

DOI: 10.21511/imfi.14(2-2).2017.02

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Does insurance hedge macro volatility? Global evidence

Paul Moon Sub Choi¹,

Won Young Chae²,

Joung Hwa Choi

et al.

Abstract: Insurance is known in the literature as a contribution to economic growth. In our crosscountry analysis, we found out that insurance density also appears to subdue macro volatility. In other words, an overall expansion of insurance coverage in an economy cushions aggregate risks. This empirical inference remains robust to controlling for other covariates known to co-move with economic activities. Given that the contribution of insurance to economic growth is more impactful in developing countries than in indus… Show more

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Cited by 3 publications

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Insurance and economic growth nexus: A comprehensive exploration of the dynamic relationship and future research trajectories

Singh,

Srivastava,

Malik

et al. 2024

Journal of Economic Surveys

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Academic interest in insurance and economic growth nexus has prospered in the last two decades. There needs to be more review‐based research in this area. We, therefore, reviewed the literature and presented future research directions helpful for the further development of the research field. This literature review seeks to enrich the discourse on insurance and economic growth through a comprehensive and detailed review of 126 articles covering 96 journals from 2004 to 2023. Using Theory, Context, Characteristics, and Methods (TCCM), a detailed analysis has been conducted on the prominent theories, research context, key variables, and the methodologies and analysis techniques employed in the literature over the past 19 years. Through content analysis, we present the findings across three knowledge dimensions related to insurance and economic growth: research focus, country focus, and insurance focus. Our research sheds light on under‐researched contexts, variables, and analytical techniques.

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Insurance and economic growth nexus: A comprehensive exploration of the dynamic relationship and future research trajectories

Singh,

Srivastava,

Malik

et al. 2024

Journal of Economic Surveys

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Estimation of the capacity of the Ukrainian stock market’s risk insurance sector

Shkolnyk

Bondarenko

Balev³

2017

Insurance Markets and Companies

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(2017)Estimation of the capacity of the Ukrainian stock market's risk insurance sector AbstractThe purpose of the article is to determine the degree of financial interaction between the stock and insurance market, or, in other words, to determine the potential capacity of the stock market's risk insurance sector for the Ukrainian insurance market. The authors examine the insurance not of all possible risks on the stock market, but only the most potentially important for the development of the stock market at this stage of economic development: insurance of professional risks of depositories and insurance of individual investments of individuals -participants of the stock market. In order to calculate the capacity of the stock market's risk insurance sector in the context of the two above mentioned types, the authors apply the models that are widely used in the economic-mathematical analysis. For mathematical calculations we used 31 absolute indicators of the characteristics of the state of the stock and insurance markets, as well as some macroeconomic indicators. When forming an array of input data for mathematical calculations we used annual values of absolute indicators for the period 2005--2015 were used. For the adequacy of the received calculations the normalization of the selected indicators was carried out. All indicators were divided into two groups: stimulators and de-stimulators. The normalization of stimulator indicators was carried out by the method of natural normalization, and of de-stimulator indicators -according to the Savage formula. The capacity of the segment of the new type of insurance was determined by the authors as the maximum possible amount of insurance premiums that insurers can get in the process of implementing a new insurance product based on the current state of development of the insurance market. The capacity of the sector of the new type of insurance was presented as a function of the main component (an indicator that directly characterizes the created segment) and the corrective component (a set of indicators characterizing the segments created indirectly). The weight coefficients of the corrective component were determined by using the Fischer's formula. As a result of the calculations, the authors obtained the data on the prospects of simultaneous introduction for the stock and insurance markets of such types of insurance as a professional liability insurance of depositories and an insurance of individual investors on the stock market.

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Financial risks of the stock market: opportunities and specifics of their insurance

Shkolnyk

Bondarenko

Balatskyi³

2019

Insurance Markets and Companies

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The Ukrainian stock market is rated as an emerging market, which is characterized by high profitability and higher risk level as compared to developed economies. Securities transactions on the Ukrainian stock market are accompanied by stable uncertainties. Moreover, insurance is the most effective way to reduce financial risks and their negative effects. Given the current economic and political instability, financial risk insurance can ensure the economic performance of business entities and stimulate their further economic development. Financial risk insurance is the liability insurance in its nature, but its terms are often included in property insurance. This insurance sector has considerable facilities, which require activation of new insurance products that will be able to protect individual and institutional investors. Insurance and stock markets are direct competitors for limited investor resources, including strategic sources such as temporarily free institutional investor funds and household savings. In general, although there is a significant interaction between the insurance and other financial markets in Ukraine, it is hardly realized at all, unlike foreign economies, where it is used to its maximum. With the development of the insurance culture of the population and insurance in general, the relevance of insurance services in a high-risk segment like the stock market increases. The article harmonizes types of financial risks arising on the stock market with the methods of their leveling (insurance, hedging, diversification, etc.), determines the risk factors of the investor in the stock market, and specifies the professional risks of financial institutions. For the Ukrainian stock market participants, the use of two types of insurance coverage, namely, Bankers Blanket Bond and Financial Institution Professional Indemnity, is proposed.

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Does insurance hedge macro volatility? Global evidence

Cited by 3 publications

References 12 publications

Insurance and economic growth nexus: A comprehensive exploration of the dynamic relationship and future research trajectories

Insurance and economic growth nexus: A comprehensive exploration of the dynamic relationship and future research trajectories

Estimation of the capacity of the Ukrainian stock market’s risk insurance sector

Financial risks of the stock market: opportunities and specifics of their insurance

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