Given the findings of the research on the impact of geopolitical tensions accompanied by rising inflation rates, declining premium income and other economic and political instabilities on insurance markets in the Adria region, European Union, BRICS, and ASEAN member states, published in scientific and professional papers over the past five years, the aim of our paper is to examine the influence of four selected economic and political factors on the demand for insurance products in the Republic of Srpska during the period from 2010 to 2023. The analysis includes 10 insurance companies headquartered in the Republic of Srpska and 5 branches of insurance companies based in the Federation of Bosnia and Herzegovina, for which a dummy variable Branch was introduced. The Granger Causality Test indicates a statistically significant impact of gross domestic product, inflation, and economic policy uncertainty on insurance demand, whereas the effect of geopolitical risk is not statistically significant. The results of the selected FGLS model outline that GDP growth has a statistically significant positive effect on insurance demand, while the World Uncertainty Index for Bosnia and Herzegovina and the Consumer Price Index have a statistically significant negative effect on insurance demand. Even though the FGLS model suggests a positive impact of increasing geopolitical risk on insurance premiums, the effect is not statistically significant. Interestingly, the Branch variable exhibited a negative impact in the selected model; therefore, the causes of the effect will be the subject of future research. The findings presented in the paper can be useful to insurance company management in the Republic of Srpska for developing strategies that will consider the risks caused by economic and political instability.

Read online

Download this PDF file

Ahir, H. & Bloom, N. & Furceri, D. (2018). The World Uncertainty Index. Available at SSRN: https://ssrn.com/abstract=3275033 or http://dx.doi.org/10.2139/ssrn.3275033

Ahir, H., Bloom, N. &Furceri, D. (2025). World Uncertainty Index for Bosnia and Herzegovina [WUIBIH], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/WUIBIH

An index of global economic policy uncertainty - Available at: https://www.nber.org/system/files/working_papers/w22740/w22740.pdf

Baker, S. R. & Bloom, N. & Davis, S.J. (2016). Measuring Economic Policy Uncertainty, The Quarterly Journal of Economics, vol. 131(4), 1593-1636.

Balcilar, M., Gupta, R., Lee, C.-C., & Olasehinde-Williams, G. (2020). Insurance and economic policy uncertainty. Research in International Business and Finance, 101253. doi:10.1016/j.ribaf.2020.101253

Berry-Stölzle, T. R., & Xu, J. (2022). Local religious beliefs and insurance companies’ risk-taking behaviour. The Geneva papers on risk and insurance. The Geneva Papers on Risk and Insurance – Issues and Practice, 47(2), 242–278. https://doi.org/10.1057/ s41288-021-00211-z

Caldara, D. & Matteo I. (2022). Measuring Geopolitical Risk. American Economic Review, 112(4), 1194-1225,

Data downloaded from https://www.matteoiacoviello.com/gpr.htm 15.2.2025

Damjanović, J. (2024). The Significance Of Commercial Law Contracts in The New Economic Reality, Novi Ekonomist, Vol 18(1).

Davis, S. J. (2016). An Index of Global Economic Policy Uncertainty. NBER Working Paper No. w22740, Available at SSRN: https://ssrn.com/abstract=2853236

EIOPA. (2024) Insurance Stress Test (report). Available at: https://www.eiopa.europa.eu/eiopas-stress-test-shows-eu-insurers-can-handle-surging-geopolitical-risks-heavy-price-2024-12-17_en

Hemrit W. (2022). Does Insurance Demand React to Economic Policy Uncertainty and Geopolitical Risk? Evidence from Saudi Arabia. The Geneva Papers on Risk and Insurance. Issues and practice, 47(2), 460–492. https://doi.org/10.1057/s41288-021-00229-3

Institute of Statistics. (2024), Statistical Yearbook, Available at: https://www.rzs.rs.ba

Insurance Agency of the Republika Srpska. (2024). Report on the state of the insurance sector in the Republika Srpska for the period from 01.01.2023. to 31.12.2023., Available at: https://azors.rs.ba/wp-content/uploads/2024/06/2.Izvjestaj_stanje_sektora_31.12.2023-AZORS-cir.pdf

Kozarević, S. (2024). ADRIA region insurance market 2023 – Trends and correlation with macroeconomic environment, Proceedings of the 35th Meeting of Insurance and Reinsurance Companies – SorS, (309-335). Sarajevo: Meeting of Insurance and Reinsurance Companies.

Kozarević, S., and Hodžić, S. (2021). What drives life insurance purchasing decisions in Bosnia and Herzegovina?, Risk Management and Insurance Review, 24 (3), 263-278.

Lee, C. & Lee, C. (2020). Insurance activity, Real Output, and Geopolitical Risk: Fresh Evidence from BRICS, Economic Modelling, Elsevier, vol. 92(C), 207-215.

Lim, S., Kyophilavong, P., & Soukchalern, P. (2024). Insurance Development, Global Economic Policy Uncertainty and Geopolitical Risk: The Asymmetric Relationship Evidence from ASEAN-5. Journal of Asian Economic Integration, 6(2), 154-168.

Mitrašević, M. (2017). Insurance Market Development Trends in Bosnia and Herzegovina and their Contribution to Economic Growth. Novi Ekonomist, 11(22), 15–23. ttps://doi.org/10.7251/NOE1722015M

Olasehinde-Williams G. O., & Balcilar M. (2022). The Effect of Geopolitical Risks on Insurance Premiums. Journal of Public Affairs, 22(1), 1–12.

Outreville, J. F. (2018). Culture and Life Insurance Ownership: Is It an Issue?. Journal of Insurance Issues, Western Risk and Insurance Association, vol. 41(2), 168-192.

Pjanić, M., Mitrašević, M., & Luković, S. (2025). Profitability determinants of life insurance companies in the Republic of Serbia. Strategic Management. Advance online publication. https://doi.org/10.5937/ StraMan2300041P

Titus, M. (2021). Higher Education Policy Analysis Using Quantitative Techniques (Data, Methods and Presentation). Springer Nature Switzerland AG.

Trinh, C.T., Ha, MT., Ho, N.Q. et al. (2023). National Culture, Public Health Spending and Life Insurance Consumption: an International Comparison. Humanit Soc Sci Commun 10, 470. https://doi.org/10.1057/s41599-023-01990-7

Xiang, F., Chang, T., & Jiang, S. J. (2023). Economic and Climate Policy Uncertainty, Geopolitical Risk and Life Insurance Premiums in China: A Quantile ARDL Approach. Finance Research Letters, 57, 1–7.

Xie, H., Lin, C. (2024). Economic Policy Uncertainty and Directors and Officers Liability Insurance: a Perspective on Capital Market Pressures. Geneva Pap Risk Insur Issues Pract 49, 605–635.

Zhou, Q. & Zhang, L. & Huang, H. (2025). Impact of Geopolitical Risk on Corporate Insurance Investment, Finance Research Letters, Elsevier, vol. 73(C).