Contribution of the non-life insurance sector to the economic growth of Nepal: Analysis from the EGLS approach

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Nepal’s non-life insurance sector holds immense potential to drive economic growth and boost the nation towards a secure financial future. Embracing this potential is a goal and a pivotal catalyst for substantial change. The study aims to determine how the non-life insurance sector can drive economic growth in Nepal. The methodology of this study uses quantitative analysis of financial data from 2013 to 2022 from 20 non-life insurance companies in Nepal and econometric modeling to assess the sector’s impact on economic growth. Using Panel EGLS (Estimated Generalized Least Squares) regression analysis, the findings show that with one-unit increments in total investment, total premium, and total tax paid, GDP is expected to change by approximately 591.52, –920.54 and 8,470.65 units, respectively. In contrast, the coefficient for total profit is –910.3477 and is not statistically significant. The study’s main conclusion implies that the insurance sector contributes to the country’s economic growth by investing in productive activities and paying taxes to the government. Still, it also imposes a cost on the economy by charging high premiums to the insured. The profitability of the insurance sector does not affect the GDP, which indicates that the insurance sector is competitive and efficient or that other factors determine the GDP besides the insurance sector. This study contributes to a deeper understanding of the non-life insurance sector’s role in Nepal’s economic development and informs evidence-based policy decisions.

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    • Table 1. Non-life insurance companies in Nepal
    • Table 2. Lagrange multiplier tests for random effects
    • Table 3. Correlated random effects – Hausman test
    • Table 4. Panel EGLS
    • Conceptualization
      Yadav Mani Upadhyaya, Khom Raj Kharel, Narayan Prasad Aryal
    • Formal Analysis
      Yadav Mani Upadhyaya, Khom Raj Kharel, Narayan Prasad Aryal
    • Data curation
      Yadav Mani Upadhyaya, Khom Raj Kharel, Basu Dev Lamichhane
    • Funding acquisition
      Yadav Mani Upadhyaya, Basu Dev Lamichhane
    • Investigation
      Yadav Mani Upadhyaya, Khom Raj Kharel, Narayan Prasad Aryal
    • Methodology
      Yadav Mani Upadhyaya, Khom Raj Kharel, Narayan Prasad Aryal
    • Software
      Yadav Mani Upadhyaya, Khom Raj Kharel, Narayan Prasad Aryal
    • Supervision
      Yadav Mani Upadhyaya
    • Validation
      Yadav Mani Upadhyaya, Khom Raj Kharel, Narayan Prasad Aryal, Basu Dev Lamichhane
    • Visualization
      Yadav Mani Upadhyaya, Basu Dev Lamichhane
    • Writing – original draft
      Yadav Mani Upadhyaya, Khom Raj Kharel, Narayan Prasad Aryal
    • Writing – review & editing
      Yadav Mani Upadhyaya, Khom Raj Kharel, Basu Dev Lamichhane
    • Project administration
      Khom Raj Kharel
    • Resources
      Basu Dev Lamichhane