The Cost of Borrowing as a Limiting Factor of Non-Life Insurance Development: The Italian Case

Giovanni Millo ()
Additional contact information
Giovanni Millo: Dipartimento di Scienze Economiche, Aziendali, Matematiche e Statistiche (DEAMS), University of Trieste, 34127 Trieste, Italy

Risks, 2024, vol. 12, issue 12, 1-15

Abstract: 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.

Keywords: insurance demand; credit conditions; regional data; spatial panels (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/12/12/189/pdf (application/pdf)
https://www.mdpi.com/2227-9091/12/12/189/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:12:y:2024:i:12:p:189-:d:1530883

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().