PRODUCT-LINE DIVERSIFICATION AND FINANCIAL PERFORMANCE: THE CASE OF THE MACEDONIAN NON-LIFE INSURANCE MARKET

Srbinoski, Bojan and Poposki, Klime and Selimovic, Jasmina (2025) PRODUCT-LINE DIVERSIFICATION AND FINANCIAL PERFORMANCE: THE CASE OF THE MACEDONIAN NON-LIFE INSURANCE MARKET. South East European Journal of Economics and Business, 20 (2). pp. 53-67. ISSN 2233-1999

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Abstract

This study investigates the relationship between product-line diversification and financial performance among non-life insurers in North Macedonia over the period 2013–2022. Drawing on firm-level data and applying fixed and random effects two-stage least squares (IV-2SLS) models, we examine whether diversification improves profitability in a market characterized by low insurance culture and heavy reliance on the regulated motor third-party liability (MTPL) segment. We use two diversification measures: the Herfindahl-Hirschman Index (HHI) of insurers’ product portfolios and a weighted HHI adjusted for market competition across lines of business. Our findings reveal a nonlinear relationship between diversification and profitability, supporting the coexistence of both diversified and specialized insurers. While initial diversification appears beneficial, excessive diversification may reduce returns, and evidence linking diversification away from competitive lines (e.g., MTPL) to higher profitability is weak. These insights carry important policy implications, suggesting that a measured liberalization of the MTPL market could support healthier diversification dynamics, while highlighting the need for careful monitoring of risk underpricing and solvency risks in evolving product strategies.

Item Type:	Article
Subjects:	Scientific Fields (Frascati) > Social Sciences > Economics and Business
Divisions:	Faculty of Tourism and Hospitality
Depositing User:	Prof. d-r Bojan Srbinoski
Date Deposited:	13 Nov 2025 08:38
Last Modified:	13 Nov 2025 08:38
URI:	https://eprints.uklo.edu.mk/id/eprint/11174

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