Insurance Liberalization and its Effects on Economies

In this study, we try to assess the effects of world and trading-block insurance market liberalization. For this purpose, we use a computable general equilibrium (CGE) model that includes 8 regions and 5 sectors. Except for the insurance and financial sectors, all other sectors are considered as perfectly competitive. To capture an imperfectly competitive structure, we assume that insurance firms with a non-competitive structure charge customers a price higher than their marginal cost. Then we estimate the Global Trade Analysis Project (GTAP) model both under a perfectly competitive structure and an imperfectly competitive one. Comparing the results of moving toward liberalization (i.e. moving from an imperfectly competitive structure to a perfectly competitive one), we conclude that the action that ensures a benefit for all parties consists in taking progressive steps toward liberalization based on GATS commitments.