Globalization, political institutions, financial liberalization, and performance of the insurance industry

• Globalization, institutions, and liberalization influence insurers’ performance.
• Greater globalization exhibits a better insurer performance.
• A stable political institution can result in better insurer performance.
• Financial liberalization has an inverse impact on insurer performance.
• Greater globalization and a stable environment drive less risk-taking for insurers.

This paper investigates the impacts of globalization, political institutions, and financial liberalization on the performance and risk-taking of insurance firms covering 1324 individual firms in 30 selected OECD countries. We find that greater globalization and a stable political institution lead insurance companies to exhibit a better performance—i.e., insurers adjust their strategies while being aware of institutional changes. By contrast, financial liberalization has an inverse impact on insurance company performance. Thus, greater globalization and a stable political environment both drive less risk-taking for insurers. These findings are particularly important to insurance markets’ competitors and national policymakers.