Insurance and Economic Growth: A Cross Country Examination

While insurance plays an important role in the financial sector, it is often ignored in the financial development-economic growth literature. This paper examines the relationship between insurance and economic growth via a global cross-country study over 1980 to 2006, using both cross-sectional estimations and dynamic panel data techniques. We find a significant positive relationship between economic growth and overall insurance, as well as more specifically for life and non-life insurance. We find weak evidence that a country’s stage of development may influence this relationship; but strong evidence that the quality of a country’s legal system and protection of property rights is positively related to insurance growth. The study adds to the existing literature in respect to the legal factors as well as offers further support for the role of insurance in the finance-growth literature.