Macroeconomic Determinants of the Loss Ratio in the Non-Life Insurance Sector in Türkiye: An ARDL Bounds Testing Approach

Abstract

This study examines the relationship between the net loss ratio in Türkiye’s non-life insurance sector and inflation, funding cost, and industrial production using quarterly data for 2013Q1–2025Q4. The empirical analysis employs the ARDL bounds testing approach and an error correction model, supported by ADF, Phillips-Perron, and Zivot-Andrews unit root tests. The main specification selected by the Akaike information criterion is ARDL (1, 1, 2, 0). The error correction coefficient is negative and significant, indicating that about 41.7% of short-run disequilibria are corrected in the following quarter. In the short run, changes in inflation increase the net loss ratio, while the current change in funding cost has a negative effect. The bounds test supports a long-run relationship at the 10% significance level but remains inconclusive at the 5% level. Overall, the findings indicate that the sector’s technical performance is particularly sensitive to short-run macroeconomic fluctuations.