How Macroeconomic Shifts Drive Insurance Returns: Evidence from OECD Countries

Öz

Insurers play a significant role in supporting financial stability by providing essential risk management solutions. However, their financial performance is highly susceptible to macroeconomic fluctuations due to their close links with financial markets and economic activity. This study investigates how macroeconomic shifts influence the return on assets of non-life insurance companies across OECD countries. Using a comprehensive dataset covering 38 nations from 2009 to 2022, a robust panel data analysis examines the effects of key economic indicators on insurance profitability. The results reveal that gross domestic product growth, industrial production, stock prices, and shortterm interest rates positively impact returns on assets, while inflation, long-term interest rates, and retail sales volume exert negative effects. These findings highlight the dual challenges faced by insurers: seizing opportunities during economic expansions and mitigating risks during periods of high inflation and financial uncertainty. The study further underscores the need for dynamic risk management strategies, diversified investment portfolios, and policy frameworks that support the industry’s resilience against macroeconomic shocks. By offering empirical evidence on the complex interplay between economic dynamics and insurance returns, this research provides valuable insights for insurers, investors, and policymakers seeking to navigate the evolving financial landscape and enhance the sector’s long-term sustainability. JEL Classification : G22 , E44 , G15

Anahtar Kelimeler

• Macroeconomic factors
• insurance profitability
• financial stability
• non-life insurance
• panel data analysis

Kaynakça

1. Alhassan, A. L., Addisson, G. K., & Asamoah, M. E. (2015). Market structure, efficiency and profitability of insurance companies in Ghana International Journal of Emerging Markets, 10(4), 648-669. google scholar
2. Amini, S., Delgado, M. S., Henderson, D. J. and Parmeter, C. F. (2012). Fixed vs. random: The Hausman test four decades later. In Essays in honour of Jerry Hausman (Vol. 29, pp. 479-513). Emerald Group Publishing Limited. google scholar
3. Asare, N., Alhassan, A. L., Asamoah, M. E. and Ntow-Gyamfi, M. (2017). Intellectual capital and profitability in an emerging insurance market Journal of Economic and Administrative Sciences, 33(1), 2-19. google scholar
4. Babuna, P., Yang, X., Gyilbag, A., Awudi, D. A., Ngmenbelle, D. and Bian, D. (2020). The impact of COVID-19 on the insurance industry. International Journal of Environmental Research and Public Health, 17(16), 5766. google scholar
5. Batrancea, L., Rathnaswamy, M. M., & Batrancea, I. (2021). Panel data analysis of economic growth determinants in 34 African countries. Journal of Risk and Financial Management, 14(6), 260. google scholar
6. Burca, A. M., & Batrinca, G. (2014). Determinants of financial performance in the Romanian insurance market International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 299-308. google scholar
7. Brewer, E. III, Carson, J.M., Elyasiani, E., Mansur, I. and Scott, W.L. (2007). Interest rate sensitivity and equity values of life insurance companies: a GARCH‐M model, Journal of Risk and Insurance, 74(2), 401‐23. google scholar
8. Cameron, A. C. and Miller, D. L. (2015). A Practitioner’s Guide to Cluster-Robust Inference Journal of Human Resources, 50(2), 317–372. google scholar

9. Camino-Mogro, S. & Bermúdez-Barrezueta, N. (2019), Determinants of profitability of life and non-life insurance companies: evidence from Ecuador. International Journal of Emerging Markets, 14(5), 831-872. google scholar
10. Christophersen, C. and Jakubik, P. (2014). Insurance and the macroeconomic environment. EIOPA-Financial Stability Report, 44-55. google scholar
11. Elamer, A. A., AlHares, A., Ntim, C. G. and Benyazid, I. (2018). The corporate governance–risk-taking nexus: Evidence from insurance companies International Journal of Ethics and Systems, 34(4), 493-509. google scholar
12. Eling, M., & Jia, R. (2019). Efficiency and profitability in the global insurance industry Pacific-Basin Finance Journal, 57, 101190. google scholar
13. Goel, R. K., Saunoris, J. W., & Goel, S. S. (2021). Supply chain performance and economic growth: The impact of COVID-19 disruptions Journal of Policy Modelling, 43(2), 298-316. google scholar
14. Guo, F., Fung, HG. & Huang, Y.S. (2009). Dynamic Impact of Macro Shocks on Insurance Premiums J Financ Serv Res 35, 225–244. google scholar
15. Hasan, M.B., Islam, S.N. Wahid, A.N.M. (2018). Effect of macroeconomic variables on the performance of non-life insurance companies in Bangladesh Ind. Econ. Rev. 53, 369–383 google scholar
16. Hong, J. H. and Rios-Rull, J. V. (2012). Life insurance and household consumption American Economic Review, 102(7), 3701-3730. google scholar
17. Hsiao, C. (2021). Analysis of Panel Data. Cambridge: Cambridge University Press. google scholar
18. Jomo, K. S., & Chowdhury, A. (2020). COVID-19 pandemic recession and recovery. Development, 63(2), 226-237. google scholar
19. IAIS. (2022). Global Insurance Market Report 2022. Retrieved from https://www.iaisweb.org/uploads/2022/12/GIMAR-2022.pdf google scholar
20. Isayas, Y. N. (2021). Financial distress and its determinants: Evidence from insurance companies in Ethiopia Powerful Business & Management, 8(1), 1951110. google scholar
21. Killins, R. N. (2020). Firm-specific, industry-specific and macroeconomic factors of life insurers’ profitability: Evidence from Canada. The North American Journal of Economics and Finance, 51, 101068. google scholar
22. Kiptoo, I. K., Kariuki, S. N., & Ocharo, K. N. (2021). Risk management and financial performance of insurance firms in Kenya Powerful Business & Management, 8(1), 1997246. google scholar
23. Kuo, K. C., Kweh, Q. L., Ting, I. W. K. and Azizan, N. A. (2017). Dynamic network performance evaluation of general insurance companies: an insight into the risk management committee structure. Total Quality Management & Business Excellence, 28(5-6), 542-558. google scholar
24. OECD. (2023). OECD Insurance Statistics 2023. OECD Publishing. Retrieved from https://doi.org/10.1787/ins-data-en. google scholar
25. Olaosebikan, O. (2013). Determinants of the profitability of micro-life insurers in Nigeria. The Geneva Papers on Risk and InsuranceIssues and Practice, 38, 140-159. google scholar
26. Park, J. and Paul Choi, B. (2011). Interest rate sensitivity of the US property/liability insurer stock returns. Managerial Finance, 37(2), 134-150. google scholar
27. Puławska, K. (2021). Financial stability of European insurance companies during the COVID-19 pandemic Journal of Risk and Financial Management, 14(6), 266. google scholar
28. Rutledge, C. (2020). A Step-by-Step Guide to Conducting Robust Hausman Tests for Random Effects vs Fixed Effects Models Using Unbalanced Panel Data in Stata. https://www.zachrutledge.com/uploads/1/2/5/6/125679559/how_to_conduct_a_robust_hausman_ test_with_unbalanced_panels.pdf google scholar
29. Sasidharan, S., Ranjith, V. K., & Prabhuram, S. (2023). What determines the financial performance micro or macroantecedents: A case of Indian general insurance Journal of Corporate Accounting & Finance, 34(2), 11-22. google scholar
30. Shahzad, U., Mohammed, K. S., Tiwari, S., Nakonieczny, J., & Nesterowicz, R. (2023). Connectedness between geopolitical risk, financial instability indices and precious metals markets: Novel findings from the Russia–Ukraine conflict perspective. Resources Policy, 80, 103190. google scholar
31. Trichet, J. C. (2005). Financial stability and the insurance sector The Geneva Papers on risk and insurance-issues and practice, 30, 65-71. google scholar
32. Ullah, M. S., Muttakin, M. B., & Khan, A. (2019). Corporate Governance and Corporate Social Responsibility Disclosures in Insurance Companies International Journal of Accounting & Information Management, 27(2), 284-300. google scholar
33. Van Buuren S. Groothuis-Oudshoorn K. (2011). Multivariate Imputation by Chained Equations in R. Journal of Statistical Software, 45(3), 1-67. google scholar
34. Wooldridge, J. M. (2010). Econometric Analysis of Cross-Section and Panel Data (2nd ed.). MIT Press. google scholar
35. Vojinović, Ž., Milutinović, S., Sertić, D., & Leković, B. (2022). Determinants of the sustainable profitability of the Serbian insurance industry: Panel data investigation Sustainability, 14(9), 5190. google scholar
36. Zainudin, R., Ahmad Mahdzan, N.S. & Leong, E.S. (2018), Firm-specific internal determinants of profitability performance: an exploratory study of selected life insurance firms in Asia. Journal of Asia Business Studies, 12(4), 533-550. google scholar