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

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Bojan Srbinoski Klime Poposki Jasmina Selimovic https://orcid.org/0000-0001-8485-8642

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.

Article Details

How to Cite
Srbinoski, B., Poposki, K., & Selimovic, J. (2025). PRODUCT-LINE DIVERSIFICATION AND FINANCIAL PERFORMANCE: THE CASE OF THE MACEDONIAN NON-LIFE INSURANCE MARKET. The South East European Journal of Economics and Business, 20(2), 53-67. Retrieved from https://journal.efsa.unsa.ba/index.php/see/article/view/2603
Section
Scientific and Professional papers: Economics and Business
Author Biographies

Bojan Srbinoski, Faculty of Tourism and Hospitality, University St. Kliment Ohridski Bitola, North Macedonia

(Corresponding author)
Assistant Professor
Faculty of Tourism and Hospitality, University St. Kliment Ohridski Bitola, North Macedonia
E-mail: bojan.srbinoski@uklo.edu.mk
ORCID: 0000-0003-4815-3762

Klime Poposki, Faculty of Tourism and Hospitality, University St. Kliment Ohridski Bitola, North Macedonia

Associate Professor
Faculty of Tourism and Hospitality, University St. Kliment Ohridski Bitola, North Macedonia
E-mail: klime.poposki@uklo.edu.mk
ORCID: 0000-0002-7497-5826

Jasmina Selimovic, School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina

Professor
School of Economics and Business, University of Sarajevo, Bosnia and Herzegovina
E-mail: jasmina.selimovic@efsa.unsa.ba
ORCID: 0000-0001-8485-8642