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New Methodology of Complex Assessment of the Insurance Services Market of Ukraine: Scale and Competition Factors, Trends and Comparisons

Journal: Oblik i finansi (Vol.1, No. 83)

Publication Date:

Authors : ; ;

Page : 114-138

Keywords : insurance market of Ukraine; competitiveness; estimation; market scale; density; insurance penetration; openness; capitalization; efficiency; concentration; competition; Gerfindahl-Hirshman index; Gini-Shirinyan index;

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The presented research is dedicated to the competitiveness of the insurance services market of Ukraine (MISU). The authors suggest the indicators of the competitiveness of the insurance services market from the point of view of expansion and influence on macroeconomic indicators and focus on the issues of ensuring the competitive advantages of insurance services providers. The first part of the methodology covers the following points of MISU analysis: 1) the territorial boundaries of the market; 2) the density of insurers and their affiliates in the market; 3) openness of the market for foreign players; 4) the importance of the insurance market for the formation of GDP; 5) the density of distribution of services in the market; 6) entry and exit barriers for players; 7) the limits of capitalization of insurers. The second part of the methodology covers the following points of MISU analysis: 1) efficiency of the activity; 2) monopolization degree; 3) competition level; 4) integrated competitiveness; 5) imbalance and saturation by players. An approach is applied to MISU analysis for 2005-2017 years. The purpose of the study is to develop a new methodology of integrated assessment of the competitiveness of MISU in terms of determining the scale factor, the effectiveness of insurance business and competition of players, on the basis of quantitative indicators and comparison of MISU with the insurance markets of other countries. Methodology. The perfection of the competitive interaction of insurers is reflected due to indicators of efficiency, concentration of insurers, Gerfindahl-Hirschman and modified Gini-Shirinyan indexes and disproportions. In order to determine the degree of advantage of set of MISU indicators over the set of indicators of insurance markets of other countries, we introduce relative indicators of competitiveness: in the first part – capitalization excess, market scale excess, excess of the density of insurers, excess of insurance penetration, excess of revenues of insurers, growth margin of concentration and assets; in the second part – capitalization excess, excess of the average asset of insurers, effectiveness exceeding for insurance activities, excess of return on equity of insurers, concentration exceeding, excess of the Gerfindahl-Girshman index, excess of imbalances. In the frame of our approach, the comparison of data and quantitative indicators has been done for the national insurance market and for countries of the eurozone and the world. The place of MISU at the international level is determined. Such comparison is realized in the context of developed and transition economies. Results. The paper defines the notion "competitiveness of the insurance services market" and develops an unified method of a comprehensive assessment of the competitiveness for the insurance market in Ukraine. It was substantiated that at a global level and within the eurozone MISU corresponds to a small scale. There are a declining trend (in US dollar) for assets and the insurance penetration, heterogeneity and imbalance of services within the country, the optimal level of market openness, high barriers to entry, a large margin of asset growth. It is shown that the bankruptcy of the largest insurer will not be felt to the Ukrainian insurance sector and will not be disruptive to the financial system of Ukraine. It is argued that attractive markets for Ukraine are the insurance markets of counties with transition economies Poland and Turkey. Low values of the profitability in recent years and almost zero efficiency of MISU have been received. It is shown that now "non-life" insurance market is weakly concentrated, the "life" insurance market has overestimated concentration indexes and corresponds to weak competition.

Last modified: 2019-04-05 22:38:25