Does insurance sector development improve environmental quality? Evidence from BRICS

The effect of financial development measured by banks, bonds, and stocks on carbon dioxide emissions (CO₂E) has been widely studied while not much is known about the effect of the insurance sector development on CO₂E. Thus, this study fills this void by estimating the effect of insurance consumption on CO₂E for BRICS (Brazil, Russia, India, China, and South Africa) from 2000 to 2016 using the instrumental variable generalized method of moments model. The findings indicate that, generally, insurance sector development spurs CO₂E in BRICS. Specifically, a 10% rise in life insurance development increases BRICS CO₂E by 1%. Also, a 10% rise in non-life insurance development increases BRICS CO₂E by 4%. Finally, a 10% rise in the composite insurance development index increases BRICS CO₂E by 2%. The study further finds that population size, trade openness, and energy consumption drive CO₂E in BRICS, while economic growth mitigates CO₂E. These results were robust to alternative econometric estimators, and alternative CO₂E proxy. Policies that promote green insurance consumption are recommended.