A Model for Estimating the Value Added of the Life Insurance Market in Egypt: An Empirical Study
Dr. N. M. Habib

Abstract
The paper is an attempt to develop a model for estimating the value added in the life insurance activity. It uses an extended version of Cobb-Douglas production function to measure efficiency of the life insurance companies in Egypt during the 1995 – 2008. The proposed model is used to examine the effects of the political and economic changes, which occurred during this period, on the efficiency of the industry. It is also utilized to rank the major Egyptian life insurance companies according to their efficiency. The study has five sections: First an introduction to the problem of the research. Second section is a review of the relevant literature. The third presents the proposed model and the explanatory variables relevant to the life insurance activity. The fourth section deals with empirical results of the model at the level of the individual companies and the market as a whole. Last section is the conclusion of the study. The empirical results show that the proposed model fits quite well in explaining the changes in the value added at both levels, the individual companies the market as a whole. The volume of the life insurance companies’ investment portfolio has positive effect on the value added. Also the labor factor has the same effect, this dismiss the claim that this sector has excessive employment, especially in the publicly owned companies. Thus, the labor factor does not represent a burden to this sector, since labor elasticity is 0.202. Another conclusion is that, the political and economic changes that occurred after September 11, have great negative effect on the insurance industry in Egypt. This effect might be due to the increase in the prices and the costs of the insurance services in addition to the decline in the rate of return from investments.

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