Financial inclusion, market concentration and underwriting performance: Empirical evidence from Central Eastern and Southeastern European countries

Synergies or trade-offs may arise between financial inclusion and financial stability, depending on the type of financial market and the level of market competition. We focus on the less inclusive and less competitive Central Eastern and Southeastern European non-life insurance markets and examine the link between financial inclusion and insurers’ underwriting performance and whether the insurance market concentration affects the inclusion-performance nexus. We use two measures of financial inclusion in insurance, one measuring the availability of insurers and the other measuring the aggregate insurance premium volumes. The results suggest that the impact of inclusion on underwriting performance is conditional on how inclusion is measured and on the prevailing market structure. These findings highlight the need for further research but also suggest that policy efforts aimed at fostering more inclusive insurance markets should consider the structural characteristics of insurance markets to ensure effective outcomes for consumers, insurers, and regulators.