Liberalisation and Market Concentration Impact on Performance of the Non-Life Insurance Industry: The Evidence from Eastern Europe

Abstract

The aim of this paper is to examine market structure, conduct and performance relationship (S-C-P) hypothesis for the non-life insurance industry in Eastern European countries. Additionally, we examine the effect of liberalisation on market structure and performance. We use the country-specific fixed effects models for panel data for the period 2004-2008 allowing each cross-sectional unit to have a different intercept term serving as an unobserved random variable that is potentially correlated with the observed regressors. Three models are presented, each placing market structure, liberalisation and profitability in a distinct environment defined by related control variables. The research results support the S-C-P hypothesis in all of the observed models, showing evidence of strong influence of market structure and liberalisation on market profitability. These results could be useful in decision-making for both governments and insurance companies.

Effects of corporate diversification on firm performance: evidence from the Serbian insurance industry

“…According to S-C-P hypothesis, higher profitability in any market is associated with anticompetitive behaviour induced by higher market concentration' (Njegomir & Stojic, 2010a). The support for the S-C-P hypothesis is abundant (e.g., Bajtelsmit & Bouzouita, 1998;Chidambaran, Pugel, & Saunders, 1997;Njegomir & Stojic, 2011;. To capture the impact of the competitiveness of firms' markets on performance, we first calculate a Herfindahl-Hirschman concentration index for each line of business (j = 1 to I L ) across all firms (i = 1 to n) in each year t…”

The Determinants of Non-life Insurance Penetration in Selected Countries from South Eastern Europe

“…Based on a analysis of 5 countries (Bosnia and Herzegovina, Croatia, Macedonia, Serbia and Slovenia) Njegomir, Stojić, and Marković [2011] analysed the performance in the non-life insurance industry for the period 24 Economics and Business Review, Vol. 1(15), No.…”

Determinants Of Nonlife Insurance Market Attractiveness For Foreign Investments: Eastern European Evidence

“…For a detailed insight to definitions of variables used in the analysis we direct the interested reader to Njegomir and Stojic, (2010).…”

“…Deregulation, privatization and liberalization have facilitated globalization of risks and insurance services (see Swiss Re, 2000;Cummins and Venard, 2007). These processes have spread over Eastern European insurance markets too (Njegomir and Stojic, 2011). Instead of being centrally planned, they became market-oriented.…”