Globalisation and Insurance Sector Penetration: Macro Evidence from Nigeria
1KOLAPO, Funso Tajudeen (Ph.D), 2ASIYANBI Haadi Babatunde (Ph.D), 3DADA, Samuel Obafemi (Ph.D)
1,3Department of Finance, Faculty of Management Sciences,Ekiti State University, Ado-Ekiti, Nigeria
2Federal College of Education, Oyo
https://doi.org/10.47191/jefms/v8-i1-61
ABSTRACT:
The impact of globalisation on the penetration of the insurance industry in Nigeria from 1987 to 2021 was investigated in this study using the distributed lag long-run estimating technique. The results from the use of KOF Globalisation index showed that globalisation promotes penetration of the insurance sector (Coeff =0.1388; p. value0.01). It furthered revealed that Insurance penetration rate rises with increased GDP per capita, population, and financial sector development. However, inflation reduces insurance penetration rate. Globalisation greatly aids in the penetration of the insurance sector in Nigeria which suggests the opening up of the Nigerian insurance market to foreign competition, lowering costs and increasing the efficiency of insurance services. The government also need to formulate appropriate policies to encourage the mobility of insurance products, services, and capital. Asides the aforementioned, insurers in Nigeria are encouraged to continuously offer globalised products that adhere to international standards to attract foreign consumers. Meanwhile, the dark sides of globalisation should be mitigated while introducing these new insurance services and products.
KEYWORDS:
Globalisation, Insurance penetration; Economic integration; Nigeria.
REFERENCES:
1) Asadiqaragoz, S., DaghighiAsli, A., Mahdaviklishomi, G., & Damankeshideh, M. (2020). Impact of globalization on the development of commercial insurance: A comparative study between perspective countries of Iran and developed countries. Monetary & Financial Economics, 27(19), 47-82.
2) Balassa, B. (1961). The theory of economic integration. Homewood, IL: Richard Irwin.
3) Balcilar, M., Gupta, R., Lee, C. C., & Olasehinde-Williams, G. (2020). Insurance and economic policy uncertainty. Research in International Business and Finance, 54, 101253.
4) Bukowski, S. I., & Lament, M. (2020). Foreign capital impact on insurance market development in EU-15 countries. Entrepreneurial Business & Economics Review, 8(3), 205-219.
5) Černohorská, L., & Klofát, M. (2021). An analysis of the insurance market in the Czech Republic. In SHS Web of Conferences, 92, 23-38. EDP Sciences-Web of Conferences.
6) Chen, P. F., Lin, C. W., & Lee, C. C. (2019). Financial crises, globalization, and insurer performance: Some international evidence. The North American Journal of Economics and Finance, 48, 835-856.
7) Fatahi, S., & Golkhandan, A. (2018). Relationship between life and non-life insurance and globalization: Study of Group D8 countries using bootstrap panel granger causality test. Economics Research, 18(69), 163-191.
8) Flores, E., de Carvalho, J. V. F., & Sampaio, J. O. (2021). Impact of interest rates on the life insurance market development: Cross-country evidence. Research in International Business and Finance, 58, 101444. doi:10.1016/j.ribaf.2021.101444
9) Inyang, U., & Okonkwo, I. V. (2021). Information and communication technology in Nigeria insurance industry: Developments, challenges and prospects. Journal of Economics, Finance and Management Studies, 4(07), 1159-1171.
10) Kolapo, F. T. P., Oluwaleye, T. O., & Osasona, A. V. (2022). Determinants of insurance sector development in Nigeria. Account and Financial Management Journal, 7(3), 2672-2685.
11) Lee, C.C., & Chang, C.H. (2012). Globalisation and convergence of international life insurance markets. The Geneva Papers on Risk and Insurance-Issues and Practice, 37(1), 125–154.
12) Lee, C.C., Chiu, Y.B. (2018). Globalization and insurance activity: Evidence on the industrial and emerging countries. The North American Journal of Economics and Finance, 36, 328–349.
13) Lee, H. S., Cheng, F. F., Nassir, A. M., Razak, N. H. A., & Har, W. M. (2019). Impacts of globalization on productivity of insurers in Malaysia: An analysis of technical efficiency change and technology change. In Proceedings of the 2019 3rd International Conference on Software and e-Business (pp. 166-171).
14) Malynych, H., & Bazhanova, N. (2019). Status, trends and development of the life insurance market in Ukraine and in the world in conditions of financial globalization. In Business Risk in Changing Dynamics of Global Village 2, 2019 (pp. 233-243). Publishing House of University of Applied Sciences in Nysa.
15) Möhlmann, A. (2021). Interest rate risk of life insurers: Evidence from accounting data. Financial Management, 50(2), 587-612.
16) Msomi, T. S. (2023). Macroeconomic and firm-specific determinants of financial performance: Evidence from non-life insurance companies in Africa. Cogent Business & Management, 10(1), 2190312.
17) Njegomir, V., & Marović, B. (2012). Contemporary trends in the global insurance industry. Procedia-Social and Behavioral Sciences, 44, 134-142.
18) Olasehinde‐Williams, G. O., & Balcilar, M. (2022). The effect of geopolitical risks on insurance premiums. Journal of Public Affairs, 22(1), e2387.
19) Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis. Chapter 11 in Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, S Strom (ed.). Cambridge University Press: Cambridge.
20) Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
21) Sawadogo, R. (2021). The relationship between insurance and banking sectors in Sub-Saharan African: Does globalization matter? Economic Change and Restructuring, 54, 101–119.
22) Shin-Huei Wang, C., & Hafner, C. M. (2018). A simple solution of the spurious regression problem. Studies in Nonlinear Dynamics & Econometrics, 22(3), 1-14
23) Srbinoski, B., Poposki, K., Kwon, W. J., & Dencic-Mihajlov, K. (2023). Greenfield foreign direct investments and insurance market diversification: A cross-country analysis. The Geneva Papers on Risk and Insurance-Issues and Practice, 1-26.
24) Sriyanto, S., Imran, M., Khan, S., Zaman, K., Lutfiansyach, D. Y., Parmono, P., ... & Jabor, M. K. (2023). Harnessing the power of globalization: A study of the association between globalization, transportation energy, and insurance and financial services in Europe and Central Asia. International Journal of Energy Economics and Policy, 13(2), 453.
25) Yavorska, T., Lyudmyla, V., & Dmytro, V. (2022). The impact of macroeconomic factors on the development of the insurance system in Ukraine.
26) Zaman, K. (2023). Navigating the paradox of democracy and military control: An analysis of an imaginary country’s political landscape. Politica, 1(1), 26-32.
