Institutional Quality, Knightian Uncertainty, and Insurability: A Cross-Country Analysis

July 1, 2006

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S. Nuri Erbas, and Chera L. Sayers Institutional Quality, Knightian Uncertainty, and Insurability: A Cross-Country Analysis, (USA: International Monetary Fund, 2006) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Artificial intelligence, Insurance, Insurance companies, Personal income

Keywords: Insurability, Insurance coverage, Life insurance, WP

Publication Details

Pages:

15
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/179
Stock No:

WPIEA2006179
ISBN:

9781451864397
ISSN:

1018-5941

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