ECOLOGICAL DEFICITS AS DRIVERS OF INSURANCE DEPENDENCE: THE COMPENSATORY ROLE OF THE INSURANCE SECTOR IN G7 ECONOMIES

Özet

This study investigates the interplay between natural disaster frequency, economic factors, environmental sustainability, and the insurance sector in G7 countries from 1989 to 2022. Employing the two-step System Generalised Method of Moments (System GMM) approach to account for endogeneity and persistence, this study examines how climate-induced disaster frequency, economic growth, greenhouse gas emissions, climatic variables, and the Load Capacity Factor (LCF), which serves as a comprehensive measure of environmental sustainability, affect insurance market penetration. Our empirical findings validate the Compensatory Hypothesis proposed in this study by demonstrating a significant negative relationship between LCF and insurance penetration. This implies that as ecological deficits widen and natural buffers are lost, G7 economies increasingly rely on the insurance sector as a financial substitute to manage disaster-related shocks. While economic growth and disaster frequency act as traditional demand drivers, the erosion of environmental sustainability emerges as a structural determinant forcing a defensive expansion of the insurance market. By foregrounding LCF, this study offers an alternative macro-financial perspective on how environmental limits interact with financial risk transfer systems. The results emphasize that financial resilience cannot be decoupled from ecological sustainability, providing actionable insights for policymakers to integrate nature-based solutions into disaster risk reduction strategies.

Abstract

This study investigates the interplay between natural disaster frequency, economic factors, environmental sustainability, and the insurance sector in G7 countries from 1989 to 2022. Employing the two-step System Generalised Method of Moments (System GMM) approach to account for endogeneity and persistence, this study examines how climate-induced disaster frequency, economic growth, greenhouse gas emissions, climatic variables, and the Load Capacity Factor (LCF), which serves as a comprehensive measure of environmental sustainability, affect insurance market penetration. Our empirical findings validate the Compensatory Hypothesis proposed in this study by demonstrating a significant negative relationship between LCF and insurance penetration. This implies that as ecological deficits widen and natural buffers are lost, G7 economies increasingly rely on the insurance sector as a financial substitute to manage disaster-related shocks. While economic growth and disaster frequency act as traditional demand drivers, the erosion of environmental sustainability emerges as a structural determinant forcing a defensive expansion of the insurance market. By foregrounding LCF, this study offers an alternative macro-financial perspective on how environmental limits interact with financial risk transfer systems. The results emphasize that financial resilience cannot be decoupled from ecological sustainability, providing actionable insights for policymakers to integrate nature-based solutions into disaster risk reduction strategies.

Yazarlar

Serap YÖRÜBULUT

Anahtar Kelimeler

Insurance Penetration, Load Capacity Factor, System GMM, Systemic Risk, Natural Disasters, Compensatory Hypothesis, Environmental Policy, G7 Economies.

JEL Codes

G22, Q54, C23, Q56

Yayın Bilgileri

Cilt 6, Sayı 1, 2026 · Sayfa 51-68

DOI: 10.52898/ijif.2026.4

Dosyalar