Competition,efficiency and soundness in European life insurance markets |
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Institution: | 1. Centre for Studies in Logistics, Infrastructure and Management, COPPEAD Graduate Business School, Federal University of Rio de Janeiro, Brazil;2. ISEG—Lisbon School of Economics and Management, ULisboa and CEsA—Research Centre on African, Asian and Latin American Studies, Rua Miguel Lupi, 20, 1249–078 Lisboa, Portugal |
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Abstract: | This paper provides cross-country evidence on the association between soundness and competition in the life insurance industry, where competition is measured by the Boone indicator. We analyse 10 European Union (EU) life insurance markets over the post-deregulation period 1999–2011. The results indicate that competition increases the soundness of the EU life insurance markets. Since the Boone indicator measures competition based on the reallocation of profits from inefficient insurers to efficient ones, our results suggest that efficiency is the mechanism through which competition contributes to insurer solvency. The soundness-enhancing effect of competition is greater for weak insurers than for healthy ones. |
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Keywords: | Competition Soundness Boone indicator European life insurers Financial crisis |
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