Insurance a Roman language. From which CentralInsurance a Roman language. From which Central

Insurance plays an important role when it comes to various challenges
Latin America is facing. For instance, insurance can contribute to the
prevention of poverty if people are affected by undesirable harmful effects and
it can also support the resilience of emerging economies against unexpected
natural disasters. According to (Swiss
Reinsurance Company 2011) report because of the existent chaos
of the European debt crisis, the world considers Latin America as a source of
stability which by itself is a sign of a significant change. Therefore, emerging economies have become
attractive places for business and investors because of their growth potential.
This leads to one of (Levine 1997) arguments whereby he states that the level
of financial development in a country can forecast the future rates of not only
economic growth and capital accumulation but also technological change.      

Latin America for instance is composed of the entire
continent of South America in addition to Mexico, Central America, and the
Caribbean islands whose residents speak a Roman language. From which Central America consists of seven countries with
approximately 46,761,485 habitants (2015-2016
estimates) and South America consists of 12 independent countries with Brazil
being the largest country by area and the most populated. Therefore, the eighteen
countries chosen for the purpose of this research are as follows: Argentina,
Belize, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, El Salvador,
Guatemala, Guyana Honduras, Mexico, Nicaragua, Panama, Paraguay, Uruguay and

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Life insurance penetration across major Latin
American markets depends upon to the insurance industry in the region to help
families understand how to fit insurance into their lives and budgets
effectively. The strong economic growth that Latin America has experienced
during the past decade has driven increased employment, income and savings, and
also penetration of life insurance products. However, the difference between
the protection needed and the protection in-place to maintain the living
standards of dependents in the event of the death of the primary breadwinner –
for eight analysed Latin America markets amounted to USD 7.2 trillion (138% of
GDP) in 2012, up from USD 3.1 trillion in 2003 (Swiss Reinsurance Company 2013).
Although the size of the gap varies from country to country the markets with
the largest gaps were identified as follows: Brazil (USD 2.5 trillion),
Argentina (USD 1.4 trillion) and Mexico (USD 1.0 trillion).The wide range of
mortality protection gap results across Latin America can be partly attributed
to differences in population size of the different markets. Inflation and
salaries, as well as survivor benefits provided by private pension funds, lack
of proper knowledge and lack of trust can be considered as other explanatory

As it can be seen, even though penetration (premiums as a percentage of
GDP) and density (premiums per capita) have improved over time, demand for
insurance still remains low compared to other regions. Hence, the lives of many Latin Americans are still uninsured
or underinsured by disturbing dimensions, according to (Swiss Reinsurance Company 2013).  While many
gaps remain, comparisons across a wide-range of countries, single country studies,
industry-level investigations, and firm-level investigations all of them argue
towards the same route: the functioning of financial systems is crucially related
to economic growth. The question still remains
as to how developing countries in Latin America can improve their economic conditions?

Hence, the purpose of this study is to deal with new
perspectives on the established debate by analyzing and discussing the role
that life insurance plays on the economic development of Latin America since
Belize in particular is located within this geographical region. The final aim of this paper however, is to identify and suggest
methodologies that Belize can implement in order to improve its economic
conditions.  This paper will not only add valuable information in the literature with
regards to the relationship between life insurance
and economic growth but will also provide suggestions as to improving Belize’s
economy. Especially, provide recommendations for policy-makers. As policy-makers can further the
development of the life insurance market since they can take into consideration
related conditions to significantly enhance economic growth. For example, when
developing the life insurance market, the government can consider reducing the
real interest rate or social security.





























Literature Review

This section
summarizes the past literature on life insurance and its relationship to the
economic growth of various countries. We look at similar studies, comparisons
of various countries and regions throughout the past years.

2.1 Similar studies

In this section we will show the importance of what the past literature
has studied with regards to the relationship of life insurance and its effects
on the economy of various countries.

It is important to note that researcher in the field such as (Campbell 1980), (Outreville 1996) and (Ward and Zurbruegg 2000) have all identified the significant positive impact that the level of
income has on the economy of a country. For instance, (Campbell 1980) claims that the force that drives consumers to purchase life insurance
is because they feel the need to protect the life of dependents. If we look at comparison of specific
countries, for instance the study by (Truett 1990) whereby they compare the consumption growth pattern of life insurance specifically
in Mexico and United States during the periods of 1964 to 1984. There
assumptions were based on the argument that abstract level demand depends on
factors such as insurance prices, level of individual
income, and availability of substitutes, among other individual and environmental
characteristics. They even further investigated with demographic variables such
as education level, age of individuals and size of population with age ranging
from 25 to 64. They were able to conclude that the higher income inelasticity
of demand for life insurance was present in Mexico at low income levels. As a
matter of fact, age, income and level of education were important factors to be
considered as they affect the demand for life insurance in both Mexico and
United States.

on the other hand, considers a wide array of countries and analyses data from
1986 covering a range of 48 countries in order to examine the relationship
between financial development and the development of the life insurance sector.
Outreville indicates that there is a significant positive relationship between
the development of the life insurance market and financial development. His
findings also indicate that the relationship becomes negative in the case of
another financial development variable for instance GDP. Furthermore, studies
reveal that there is a negative relationship between life expectancy and life
insurance. Hence, higher mortality rate should result in higher life insurance
activity. On the other hand, (Outreville 1996)
and (Ward and
Zurbruegg 2000)
studies reveal that there is a positive relationship between life expectancy
and life insurance premiums. (Beck, Levine, and Loayza 2000) used cross-country instrumental variables and found a
link between using
instrumental variables, the exogenous component of financial intermediary
development and long-run economic growth. They proved that exogenous components
of financial improvements are connected not only to capital accumulation but
also to productivity growth.

(Beck and
Webb 2002),
states that banking sector development assists in the development of life
insurance and its contractual savings function. While an efficient banking
system can contribute in the development of the life insurance sector by
offering payment services and increasing confidence in financial institutions,
life insurance among other forms of contractual savings can raise the
development of capital markets through the demand for long-term financial
investment. Therefore, we can determine that life insurance is affected by
financial markets and other financial products. While (Arena 2008)
 like (Outreville 1996)
considers an array of countries to be tested. Their paper however, tested the causality relationship between
insurance market activity (life and non-life insurance) and economic
growth. The author gathered panel data for 55 countries and implemented the generalized method of moments from the period of 1976-2004. His results reveal
that there is causal relationship between insurance
market activity and economic growth.
The results showed that both life and non-life insurance on economic growth
were positive and statistically significant. Meanwhile (Beck and Webb 2002) focuses in the banking sector (Chen, Lee, and Lee 2011) focuses on the stock market operations area. Hence,
(Chen, Lee, and Lee 2011)
studied the relationship between life insurance market development as well as
stock market operations and the implication for economic growth using data from
1976 to 2005 for 60 countries. A derivative of the endogenous growth model was
employed to analyse the relationship. The generalized method of moments (GMM)
technique was used in estimating the equations that link life insurance and
stock market with growth. The result from the study shows that the development
of the life insurance market leads economic growth. The results further showed
some evidence that stock market and the life insurance market are substitutes
rather than complements. The results imply that causality runs from life
insurance market to economic growth.

Furthermore, (C. C. Lee, Lee, and Chiu
2013) focused
on 41 countries from 1979 to 2007
in order to analyse the relationship between
activities in the life insurance and economic
growth. Whereby their outcomes
point out that the long-run equilibrium relationship between real GDP and real life insurance premiums occurs when heterogeneous country effect is allowed. (Pradhana, Arvinb, and Norman  2015)
studied 34 OECD countries for a period of 24 years from 1988 to 2012. Their
focus was on the causal relationships between insurance market development,
financial development, and economic growth. Their results reveal that both
insurance market and financial market development are long-run instrumental
factors of economic growth. On the other hand, short-run causality whereby
results reveal that patterns vary in the short-run and require adjustments
between variables with feedback being required between them in several
instances. Therefore, close relationship between insurance
market development, financial development, and economic growth illustrates that
in the longer run the OECD countries can keep up with economic growth. In order
to achieve economic growth however, rather than just pursuing financial
development as a whole they need to consider developing their insurance sectors.

extensive literature has studied insurance development on economic growth and
direct impact that institutions have on insurance and economic growth (C. Lee et al. 2016) took a different
approach. By applying the newest dynamic panel threshold model, they further
investigated how institutional environments influence the relation that
insurance development and economic growth have. Their results reveal that
relatively unhealthier institutional environments resulted in a negative
relationship between life insurance and economic growth. They noted that, after
a particular level or threshold of institutional quality has been attained this
significantly negative effect turns out to be insignificant.              Therefore, unhealthy institutional
conditions could prevent the growth and development effect of life insurance

The above literature shows
that researchers have studies insurance and economic growth from different
perspectives. The related research topics mentioned above indicate that indeed
the life insurance industry contributes to economic growth.  It reveals that there is a significant and
causal relationship between the insurance sector and economic growth. It was
also shown from the empirical reviews that life insurance industry has
significant effect on economic growth.