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Institutional Quality, Knightian Uncertainty, and Insurability: A Cross-Country Analysis
Author:
Mr. S. Nuri Erbas
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Chera L. Sayers null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 179
Language:
English
Publication Date:
01 Jul 2006
DOI:
https://doi.org/10.5089/9781451864397.001
ISBN:
9781451864397
ISSN:
1018-5941
Pages:
15
Keywords:
WP; insurance coverage; insurability; life insurance
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Knightian uncertainty (ambiguity) implies presence of uninsurable risks. Institutional quality may be a good indicator of Knightian uncertainty. This paper correlates non-life insurance penetration in 70 countries with income level, financial sector depth, country risk, a measure of cost of insurance, and the World Bank governance indexes. We find that institutional quality-transparency-uncertainty nexus is the dominant determinant of insurability across countries, surpassing the explanatory power of income level. Institutional quality, as it reflects on the level of uncertainty, is the deeper determinant of insurability. Insurability is lower when governance is weaker.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund