Natural Disasters, Political Risk and Insurance Market Development

Chun-Ping Chang and Aziz N Berdiev ()
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Aziz N Berdiev: Department of Economics, Bryant University, Smithfield, RI 02917, U.S.A.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2013, vol. 38, issue 3, 406-448

Abstract: We examine the relationship between natural disasters, political risk and insurance market development in a panel of 39 countries over the period 1984–2009 using a dynamic panel two-step system generalised method of moments model. We provide evidence that the incidences of natural disasters and deaths caused by natural disasters lead to greater total insurance, as well as life insurance and non-life insurance consumption. We also find that countries with lower levels of political risk experience higher insurance consumption. The incidences of natural disasters and deaths attributable to natural disasters contribute to insurance market development under the tenure of a government with lower levels of political risk. We therefore emphasise that natural disasters, political risk and their interaction effects are important determinants of insurance market development.

Date: 2013
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