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Competition, efficiency and soundness in European life insurance markets

J. David Cummins, María Rubio-Misas and Dev Vencappa

Journal of Financial Stability, 2017, vol. 28, issue C, 66-78

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 analyse 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: Competition; Soundness; Boone indicator; European life insurers; Financial crisis (search for similar items in EconPapers)
JEL-codes: G22 G28 G01 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:finsta:v:28:y:2017:i:c:p:66-78