Harold D. Skipper, Jr., Ph.D.
Professor of Risk Management and Insurance
C. V. Starr Chair of International Insurance
College of Business Administration
Georgia State University
Atlanta, GA / USA
hdskipper@gsu.edu

Center for Risk Managementment and Insurance Research Occaisional Paper 97-2

The appropriate role of foreign insurers in national insurance markets continues to be a topic of great interest and concern to policy makers. Over the past few decades, perhaps the most common view has been that foreign insurers should be constrained in various ways, if not barred altogether. Thus, countries often prohibited or severely limited foreign ownership of domestic insurers.

Dozens of countries have undertaken macroeconomic reforms. Domestic microeconomic reforms have followed. Many countries have opened their markets to foreign goods and services. Foreign direct investment, formerly discouraged, is now sought. Tariff and non-tariff barriers have fallen. State-owned enterprises have been privatized. Many governments have deregulated industry, commerce and domestic finance.

Simultaneously, concern persists that certain dimensions of this liberalization euphoria may carry unacceptable risks and drawbacks. One such concern relates to the appropriate role of foreigners in the provision of financial services generally and insurance in particular. This paper focuses on the concerns and issues associated with this role as they relate to the insurance markets of developing countries and economies in transition to market economies, referred to collectively as emerging markets.

The paper first sets out the possible methods of foreign insurer involvement in national markets; i.e., through cross-border and establishment trade. This monograph focuses on establishment trade within the direct insurance market.