Insurance Development, Global Economic Policy Uncertainty and Geopolitical Risk: The Asymmetric Relationship Evidence from ASEAN-5

Academia and governments have shown interest in studying the influence of the global economic policy uncertainty index (GEPU) and the geopolitical risk index (GPR) on insurance development. Several empirical studies have been conducted to examine the influence of GEPU and GPR on insurance development. Nevertheless, the empirical results failed to achieve consensus. This study aims to study the asymmetric impacts of the GEPU and the GPR on insurance sector development in ASEAN from 1990 to 2020. We used the linear panel autoregressive distributed lag (PARDL) approach and the asymmetric panel autoregressive distributed lag (PNARDL) approach. The results from the linear panel ARDL showed that GEPU and GPR had an impact on non-life insurance (NI), but both variables did not have an impact on life insurance (LI). Furthermore, the asymmetric panel ARDL showed no significant impact of positive shocks from GEPU had a positive impact on LI and NI, but the negative shocks from GEPU only had a positive impact on NI. Positive and negative shocks from GEPU lead to an increase in the NI. Interestingly, we found that the positive shocks of GPR led to an increase in NI, but positive or negative shocks of GPR did not have an impact on LI. Policymakers in ASEAN should closely look at the GEPU and the GPR for insurance policy development. JEL Codes: E6, G0