Competition, Efficiency, and Soundness in European Life Insurance Markets

13 Pages Posted: 18 Jun 2016 Last revised: 8 May 2017

See all articles by J David Cummins

J David Cummins

Temple University - Risk Management & Insurance & Actuarial Science

María Rubio-Misas

University of Malaga - Finance & Accounting

Dev V. Vencappa

Nottingham University Business School

Date Written: June 15, 2016

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.

Keywords: European Life Insurance Markets, Convergence, Metafrontiers, Cost and Revenue Efficiency, Environmental Factors

JEL Classification: G22, D24, F36

Suggested Citation

Cummins, J. David and Rubio-Misas, María and Vencappa, Dev V., Competition, Efficiency, and Soundness in European Life Insurance Markets (June 15, 2016). Journal of Financial Stability, Vol. 28, No. 1, 2017. Available at SSRN: https://ssrn.com/abstract=2796600 or http://dx.doi.org/10.2139/ssrn.2796600

J. David Cummins

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1801 Liacouras Walk.
Philadelphia, PA 19122
United States
215-204-8468 (Phone)
215-204-4712 (Fax)

María Rubio-Misas (Contact Author)

University of Malaga - Finance & Accounting ( email )

Spain
+34 952131236 (Phone)

Dev V. Vencappa

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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