The purpose of this paper is to investigate empirically the relationship between property‐liability insurance premiums and economic and financial development in the case of Portugal, assuming a supply‐leading causality pattern of development. In other words, the expansion of the financial system precedes the demand for services.
The paper conducts OLS estimations between premiums and the gross domestic product (GDP) in order to evaluate the economic growth, in addition to the ratio of the broader definition of money (M2) to GDP and the ratio of currency to demand deposits (M1/M2), in order to assess financial development.
The level of the gross domestic product is the only factor explaining the level of property‐liability insurance demand in Portugal.
To the best of the author's knowledge, this is the first attempt to examine determinants of property‐liability casualty insurance in Portugal, using time series data.
