THE INNOVATIVE IMPACT OF INSURANCE FOR ECONOMIC GROWTH: THE EVIDENCE FROM NEW EU MEMBER STATES

Abstract

Insurance market activity, both as a financial intermediary and a provider
of risk transfer and indemnification, may contribute to economic growth by
allowing different risks to be managed more efficiently and by mobilizing
domestic savings. During the last decade, there has been faster growth in
insurance market activity, particularly in emerging markets given the process of
liberalization and financial integration, which raises questions about its impact
on economic growth.The aim of this paper is to examine relationship between
insurance sector development and economic in 11 new EU member states from
CentralandEasternEurope, using annual data fortheperiod 1999-2018. We apply
dynamic and fully modified ordinary least squares to estimate the relationship
between the variables. The results of our study indicate there are a positive and a
significant relationship between insurance, measured through penetration, and
economic growth Thus, functions of insurance companies - providing means of
risk management and performing mobilization and allocation of resources - are
important for economic growth and is in line with previous studies and with
our hypothesis These results could be useful for regional governments that seek
to improve economic growth as they suggest the need for implementation of
stimulative policies for the development of insurance industry.