Do international remittances promote formal insurance uptake in developing countries? Evidence from a dynamic panel model

Abstract

We investigate whether international remittances influence formal insurance (life and non-life) uptake in 103 developing countries using panel data from 1990 to 2020 and the System Generalized Method of Moments estimation technique. While remittances are often viewed as informal insurance, our findings reveal a contrasting dynamic. Specifically, we find that remittances boost non-life insurance uptake but reduce life insurance demand. A further moderation effect analysis shows that the positive remittance-non-life insurance link is amplified by the prevalence of road accidents, natural disasters, and access to information; the link with life insurance is unaffected. These findings challenge the prevailing notion that remittances are mere household safety nets, highlighting their role in shaping formal insurance adoption, especially as a strategic response to climate change in developing countries. Our findings are robust to alternative estimation techniques.