Foreign Participation and Its Relationship with Non-Life Insurer Performance in the Northeast Asian Markets

Yu-Luen Ma, Nat Pope and Raymond Yeung
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Yu-Luen Ma: Katie School of Insurance and Financial Services, Illinois State University, Normal, IL 61790-5490, U.S.A.
Nat Pope: Katie School of Insurance and Financial Services, Illinois State University, Normal, IL 61790-5490, U.S.A.
Raymond Yeung: Australia and New Zealand Banking Group (ANZ), Level 22, Three Exchange Square, 8 Connaught Place, Central, Hong Kong.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2013, vol. 38, issue 1, 43-61

Abstract: This research examines the relationship shared by a national insurance market's competitive structure and insurer profitability. For these purposes, a market's competitive structure is defined by the level of foreign presence and market concentration. The analysis focuses on the four major non-life insurance markets of Asia: Japan, the People's Republic of China, South Korea and Taiwan. The analysis tests hypotheses derived from the broad body of theory generally referred to as the structure-conduct-performance (SCP) hypothesis. The methodological approach makes a significant improvement over previous related work in that it also includes insurer-level data in additional to market-level control variables. In doing so, this research holds out the potential for consideration in the development of insurer-specific strategies in light of a potential influx of foreign competitors. The key findings of this research include general support for the expectations of the SCP hypothesis that predicts dominant firms in concentrated markets will drive up product price and generate associated higher levels of profit.

Date: 2013
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