Insurance Policy Thresholds for Economic Growth in Africa

This study investigates the role of insurance in economic growth on a panel of 48 countries in Africa for the period 2004-2014. The research question the study seeks to answer is: what thresholds of insurance penetration positively affect economic growth in Africa? The empirical evidence is based on the Generalized Method of Moments. Life insurance increases economic growth while the effect of non-life insurance is not significant. Increasing both life insurance and non-life insurance has negative net effects on economic growth. From an extended analytical exercise, 4.149% of life insurance premium (% of GDP) is the minimum critical mass required for life insurance to positively affect economic prosperity, while 1.805% of non-life insurance premium (% of GDP) is the minimum threshold required for non-life insurance to positively affect economic prosperity. Thresholds are also provided from the Hansen (J Econom 93(2):345-368, 1999) Panel Threshold Regression technique using a balanced sample of 28 countries.