Does the strength of the legal systems matter for trade in insurance and financial services?

• The effect of the legal systems on the trade in financial services is examined.
• The fixed effects estimation method is adopted.
• The rule of law and contract enforcement is found to be significant variables.
• The main policy implication is to strengthen the rule of law and contract enforcements.

This paper investigates if the strength of the legal system impacts on the trade in insurance and financial services in the high-income OECD and developing countries. Our findings reveal a statistically significant positive correlation of rule of law and regulatory quality with the exports and imports of insurance and financial services. Our empirical findings also reveal a negative and statistically significant correlation of contract enforcement with the exports and imports of insurance and financial services. We conclude that strengthening the rule of law and contract enforcement mechanisms can facilitate higher levels of trade in insurance and financial services.