The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case
We address the effect of local financial conditions on the demand for non-life insurance. We consider the spread between the interest rates faced by the insured on the local credit market and the return rates earned by the insurer on national or international financial markets, sketching how it infl...
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MDPI AG
2024-11-01
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| Series: | Risks |
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| Online Access: | https://www.mdpi.com/2227-9091/12/12/189 |
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| author | Giovanni Millo |
| author_facet | Giovanni Millo |
| author_sort | Giovanni Millo |
| collection | DOAJ |
| description | We address the effect of local financial conditions on the demand for non-life insurance. We consider the spread between the interest rates faced by the insured on the local credit market and the return rates earned by the insurer on national or international financial markets, sketching how it influences the present value of an insurance policy; we then use the local invariance of the insurer’s returns to identify the effect on demand. Drawing on a panel of Italian provinces with ample variability in insurance density as well as borrowing conditions, we show that the demand for non-life insurance decreases with the borrowing rate. We separate between different non-life insurance lines, finding a stronger effect for the lines prevailing in advanced economic systems. Credit conditions turn out to be an important factor of non-life insurance development, and they help to explain the underdevelopment of insurance markets in Southern Italy. |
| format | Article |
| id | doaj-art-ec29e3d3daee44b689b1d7440883969a |
| institution | Kabale University |
| issn | 2227-9091 |
| language | English |
| publishDate | 2024-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj-art-ec29e3d3daee44b689b1d7440883969a2024-12-27T14:51:50ZengMDPI AGRisks2227-90912024-11-01121218910.3390/risks12120189The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian CaseGiovanni Millo0Dipartimento di Scienze Economiche, Aziendali, Matematiche e Statistiche (DEAMS), University of Trieste, 34127 Trieste, ItalyWe address the effect of local financial conditions on the demand for non-life insurance. We consider the spread between the interest rates faced by the insured on the local credit market and the return rates earned by the insurer on national or international financial markets, sketching how it influences the present value of an insurance policy; we then use the local invariance of the insurer’s returns to identify the effect on demand. Drawing on a panel of Italian provinces with ample variability in insurance density as well as borrowing conditions, we show that the demand for non-life insurance decreases with the borrowing rate. We separate between different non-life insurance lines, finding a stronger effect for the lines prevailing in advanced economic systems. Credit conditions turn out to be an important factor of non-life insurance development, and they help to explain the underdevelopment of insurance markets in Southern Italy.https://www.mdpi.com/2227-9091/12/12/189insurance demandcredit conditionsregional dataspatial panels |
| spellingShingle | Giovanni Millo The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case Risks insurance demand credit conditions regional data spatial panels |
| title | The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case |
| title_full | The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case |
| title_fullStr | The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case |
| title_full_unstemmed | The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case |
| title_short | The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case |
| title_sort | cost of borrowing as a limiting factor of non life insurance development the italian case |
| topic | insurance demand credit conditions regional data spatial panels |
| url | https://www.mdpi.com/2227-9091/12/12/189 |
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