Microeconomic and macroeconomic determinants of the profitability of the insurance sector in Macedonia

Abstract

The aim of this paper is to investigate the impact of the most representative microeconomic and macroeconomic determinants on the profitability of the insurance sector in Macedonia. The Johansen cointegration technique has been applied to the regression model with quarterly data for the period of time from 2006 to 2011. The results confirm the theoretical suggestions that the assets have a statistically significant positive impact on ROE, from the micro perspective. The interest rate on denar deposits without a currency clause for enterprises has a statistically significant positive impact on ROE and ROA, whilst the rate on deposits of non-financial entities in terms of GDP has a statistically significant negative impact on ROE and ROA, from the macro perspective. Recommendations for increasing the profitability of insurance companies: more productive use of their resources, launching innovative products, enlarging their portfolio, promotions to investors for recapitalization. Recommendations from the macro aspect: structural reforms, extension of savings investments in banks, implementation of new financial instruments, mutual projects amongst the insurance and banking sectors in order that they become complementary.