European Insurance Market Analysis via a Joint Functional Clustering Method

Abstract

The enlargement of the European Union (EU) to include Central and South-Eastern European countries in 2004 and 2007 launched an integration process that unifies the economies and financial markets of member states and enables the convergence of these two areas. This study focuses on analyzing the development and similarity of the European insurance sector after the EU enlargement. We study 34 European insurance markets from 2004 until 2021 based on a certain set of indicators that characterize insurance markets, such as Insurance Density, Insurance Penetration and Gross Written Premiums to name a few. With a functional clustering method applied to such indicators, we try to reveal whether there are similarities between the individual countries that could explain the European insurance market homogeneity and convergence via the EU integration process. The proposed method has also a practical importance since it provides visualization of the clustering results through the construction of global envelopes. This study supports the works of EU policy makers that have a major impact on the ability of further integration of the European insurance market.Keywords: European insurance markets, enlargement EU, convergence, insurance integration, insurance market indicators, functional clustering, global rank envelope