Bank-Insurance Integration Level In Ukraine: Science-Methodological Approach

Abstract

The methodological approach to the assessment of bank-insurance integration (BII) level in Ukraine based on the calculation of integration index using of binary characteristics and matrix analyses instruments is given in the following paper. The proposed approach considers the presence of part (full) integration of bank capital and insurance companies, and the connection between these financial intermediaries in spheres of life and risk insurance in terms of the absence of their mutual participation in capital (bancassurance). Our findings evidence a low value of BII level in Ukraine during 2002-2013 in conditions of the gradual integration processes’ acceleration and the appearance of new innovative forms of bank-insurance cooperation.

Full text

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2253 The Clute Institute
Bank-Insurance Integration Level In
Ukraine: Science-Methodological Approach
Kseniya Bagmet, Russian State Social University, Branch In Stavropol, Russia
Faten Ben Bouheni, ISC Paris Business School, France
Hassan Obeid, European Business School, France
ABSTRACT
The methodological approach to the assessment of bank-insurance integration (BII) level in
Ukraine based on the calculation of integration index using of binary characteristics and matrix
analyses instruments is given in the following paper. The proposed approach considers the
presence of part (full) integration of bank capital and insurance companies, and the connection
between these financial intermediaries in spheres of life and risk insurance in terms of the absence
of their mutual participation in capital (bancassurance). Our findings evidence a low value of BII
level in Ukraine during 2002-2013 in conditions of the gradual integration processes’
acceleration and the appearance of new innovative forms of bank-insurance cooperation.
Keywords: Bank; Insurance Company; Financial Group; Integration Level; Bancassurance
INTRODUCTION
odern world business architecture is characterized by widening and deepening of integration
interconnections among financial intermediaries. Bank-insurance integration became the most
noticeable phenomenon of macroeconomic process, the level of which to some extent sets the
conditions for development of financial sector of economics according to the phase of cycle at the present moment.
From the one side, at the raise of business activity at the high level of bank-insurance integration financial
intermediaries get quicker and flexible access to internal and external investment resources that in its turn promote
faster development of the financial sector and economic growth of the country in general. From the other side, in the
slump phase of business activity presence of close integration interconnections between banks and insurance
companies becomes threatening.
As the diffusion of crises impulses from bank segment on insurance segment is distributing faster and
destabilize functioning of the financial sector in general, regulation of the mentioned above processes and
preventing the financial sector turbulence becomes possible in the conditions of having information about character
and level of the integration. This position of the question explains the necessity of working out the methodological
base of bank-insurance integration level with the aim to define the tools that can influence these processes on the
example of Ukraine during 2002-2013.
Our findings show a low BII level in Ukraine in 2002-2013, which could be explain by myriad problems,
such as legislative, conjectural, organizational (infrastructural), information and technological problems, and
problems in the area of interaction with customers. Solving of the mentioned issues demands: 1) evolution of
legislative base of financial groups activity regulation; 2) regulation of relations between insurance companies and
insurance agents (banks) on the base of delivered open and pure accreditation insurance companies in banks; 3)
implementation of set off mechanism of insurance companies’ funds placed on bank's deposits during moratorium
on their early withdrawal, and funds of bank-beneficiary according to the insurance contract as counterclaims; 4)
implementation of interim financial reporting for insurance companies, with obligatory information disclosure
connected with the insurance premiums volume, gathered according to the each type of insurance (life or non-life)
through bank distribution channel; 5) gradual implementation of the Directives of the European Parliament and of
the Council of Europe Basel II, Basel III, in particular, concerning the formation of countercyclical capital buffers
M

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2254 The Clute Institute
by banks; 6) development of prudential and macro-prudential control of banks and insurance companies' activity.
Implementation of such recommendations will let to enroll the possibilities of Ukrainian insurance companies and
banks' consolidation from one side (it means the level of their safe integration for financial sector functioning), but
from the other side will not allow the expansion of negative consequences in bank functioning on insurance
companies activity, and also will help the effective regulation of financial groups activity and providing a stable
functioning of the financial sector of economy in whole.
POTENTIAL USERS OF INFORMATION ABOUT THE
ESTIMATION OF THE BII LEVEL IN UKRAINE
A thorough analysis of domestic and foreign researches (Cetorelli and Goldberg, 2011; Chen et al. 2014;
Cummins and Weiss, 2010; Ghimire, 2013; Jeon et al. 2013; Kist, 2001; Schoenmaker, 2013) proves the absence of
methodological approaches to bank-insurance integration level in the country. Anyway the results of such estimation
are interesting for a range of subjects, the characteristics of which are presented at the Figure 1.
Figure 1. Ways of using and potential users of information about the estimation of BII level in Ukraine
Despite the direct participants of integration processes (banks and insurance companies) the potential users
of information about the estimation of BII level in Ukraine are state regulation and control authorities and self-
regulating organizations. Thus, for example, the National Bank of Ukraine (NBU), National commission of state
regulation in the sphere of financial service markets (NatComFinServ), Association of Ukraine’s Banks (АUB),
Independent Association of Banks of Ukraine (IABU), League of Insurance Organizations of Ukraine (LIOU) can
use the obtained data for preparation of analytical reports about the modern condition and tendencies of
development of bank and insurance business segments of economic sector, and also while the process of
management decision making connected with:
Foreign and domestic
banks and insurance
companies
Cabinet of Ministers of
the Ukraine, Ministry of
Economic Development
and Trade, MinFin of the
Ukraine, NBU,
NatComFinServ, AUB, ,
IABU, LIOU.
The value of potential and possibilities of roll out with the
help of using bank insurance or capital integration among
financial mediators.
!
1. Including the results of estimation of the BIII Level into
analytical reports and development strategy.
2. Determination of the demand in mega regulator.
3.Determination of the demand in heightening
requirements to the rates of sufficiency of financial groups
capital.
4. Identification of potential financial risks.
5.Working out and input of the measure system for
protecting of the insurance business.
Potential Users of Information about the Value of the level BII in the Ukraine

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2255 The Clute Institute
a)!Determination of the necessity in mega regulating creating in Ukraine:
At the heightened or high levels of integration the creating of consolidative structure of supervision in
Ukraine will be objectively necessary. But currently it is needful to think about the necessity of uniting supervising
functions in different spheres of financial markets in the nearest perspective. The system of consolidative
supervision over financial groups activity in present conditions of Ukraine economic development can be formed
without establishing the unified authority of state regulation, at the expanse of increasing of interconnections and the
level of coordination among different in their functions authorities of state supervision. Taking into account the low
level of bank-insurance integration in the Ukraine, the most optimal form of consolidative supervision can be
legislative proved multilateral agreement among NBU, NCFS and National Commission on the Capital Issues and
Fond Market (NCCIFM). From the other side, taking into account the dynamics of the BII development and bank-
oriented financial system in the Ukraine, establishment of mega regulator on the base of the National Bank of
Ukraine can become the objective demand in short-term perspective. It must be noted that while the research was in
process the National Bank of Ukraine proved a new concept of bank system reforming in Ukraine till 2020, which
supposes the forming of mega regulator on the base of central bank of the country. So the diversion of insurance
companies for NBU supervision is supposed to implement till the middle of 2015, stocks market regulation - till the
middle of 2016.
b)!Determination of the necessity to increase the requirements of capital adequacy of financial groups.
The question of creating the unified and standardized system of regulation of the capital adequacy of
financial groups is remaining topical, as the requirements to the minimum authorized capital amounts of banks and
insurance companies (120 mln hrn. or 1 (1,5) mln euro) and the method of calculation of capital adequacy differ
significantly. Moreover, methodological approach to definition of sufficient amount of financial group’s capital
requires further researches. It is obvious that with the aim of risks’ protection the minimum amount of the total
group’s capital must exceed than the absolute sum of minimum amounts of authorized capitals of banks and
insurance companies. This, first of all, is caused by the possibility of «multiplicative effect» occurrence among bank
risks, arising mostly in assets, and among insurance companies which as a rule are related to liabilities.
c)!Identification of potential systemic risks, which can be realized as a result of increased and high BII
levels.
d)!Working out and adoption of system of measures for insurance market protection from the negative
consequences of financial crises caused by ineffective bank activity.
DATA AND METHODS
Author’s approach to the formalization of BII level assumes the calculation of the integral index «LBII» – «Level of
the banking and insurance integration» (Figure 2), where:
xi – quantitative value of i- indicator (i = 1 ÷ 9);
j – indicator of integration level (j = 1 ÷ 4);
α – weight coefficient of i-indicator (i = 1 ÷ 9);
tij – binary characteristics of i- indicator correspondence to j-level of integration;
сij – characteristics of the intensiveness of quantity meaning of i- indicator influence on j- level of
integration;
tmj – binary characteristics of the intensiveness of quality value influence of the value of i- indicator for the
conforming level of BII (m = 1 ÷ 36);
ℓ – indicator of determination of the low, middle and high maximum borders of BII levels.

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2256 The Clute Institute
Figure 2. Methodological approach to the estimation of bank-insurance integration level
The first stage of formed approach supposes the selection and grounding of individual indexes of LBII esteem, and
determination of their maximum values (Figure 3).
Stage 1.
Selection and grounding of LBII indicators,
determinations of the maximum values
Stage 2.
2.1 Setting of the correlations between qualitative
value of i-indicators of LBII with BII level
2.2 Assignment of the qualitative value of BII
leve to i-indicator of LBII throughout the binary
characteristics
Stage 3.
Generalization of the value correlations of
i-indicator of LBII v alue and BII level
Stage 4.
Determination of weight coefficients for each
LBII rate
α
i = 1 ÷ 9
Stage 5.
Determination of maximum value of the integration
level, which can be achieved in the condition of
hight rates of all LBII indexes
Stage 6.
Quantitative estimation and qualitative interpretation
of LBII
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i
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[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-1]
BII Level
Low
Middle
Heightened
High

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2257 The Clute Institute
Figure 3. The maximum values of BII rate estimation in Ukraine
п/п
LBII index
The maximum limits of the index
according to the integration level
Low
Middle
Heightened
High
Rates of bank-insurance integration (BII in the narrow meaning)
x1
Specific weight of the general volume of banks and
insurance companies capital, which form the structure of
integration association, in general volume of capital of all
Ukrainian banks and insurance companies.
[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-1]
x2
Specific weight of the general assets of banks and
insurance companies capital, which form the structure of
integration association, in general volume of capital of all
Ukrainian banks and insurance companies.
[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-1]
x3
Specific weight of the general number of banks and
insurance companies, which form the structure of
integration association, in general volume of capital of all
Ukrainian banks and insurance companies.
[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-1]
x4
Banks’ participation in insurance companies’ capital.
[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-1]
x5
Insurance companies’ participation in banks’ capital.
[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-1]
Bank-insurance interaction (BII in wide meaning)
Life insurance sphere rates
x6
The share of bancassurance in gross insurance bonuses on
life insurance.
[0-0,1)
[0,1-0,3)
[0,3-0,5)
[0,5-0,8]
x8
The share of mathematical reserves placed at the deposit
accounts in banks or in bank metals, or at the current and
deposit (saving) accounts in bank metals.
[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-0,85]
Risk insurance sphere rates
x7
The share of bancassurance in gross insurance bonuses on
risk (non-life) insurance.
[0-0,1)
[0,1-0,3)
[0,3-0,5)
[0,5-0,8]
x9
The share of technical reserves, which are placed at the
deposit accounts in banks, or at the current and deposit
(saving) accounts in bank metals.
[0-0,3)
[0,3-0,5)
[0,5-0,7)
[0,7-1]
The given list of indicators is formed on the base of elaborated by the author classification of types and forms of bank-insurance
interaction implementation (Figure 4).

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2258 The Clute Institute
Figure 4. Types and Forms of Bank-Insurance Interaction
The first part of indexes (see Figure 3) characterizes the density of integration connections among banks and
insurance companies, and takes into consideration the presence of the direct participation in capital - the BII in its
narrow definition (see Fig. 4). The second group includes the indexes, characterizing the presence of interactions,
unconnected with banks and insurance companies assets integration. In fact the discussion is about: 1) using by
financial intermediaries such form of bank-insurance integration as bancassurance, which does not demand the
direct capital uniting; 2) using by the insurance companies such ways of own insurance reserves replacement as
deposit accounts in banks and bank metals.
Bank-insurance
Integration of bank
and insurance
companies capital
FPG, FG, financial
supermarket, financial
conglomerate
Banks and insurance
companies
consolidation
Strategical Alliance
Convergence of bank
and insurance
business
General Distribution
Channels
Complex Financial
Products
Forms of bank-insurance
interaction
Full (part)
capital
integration
Uniting of informational, technological,
human resources, management and other
resources
BII in narrow meaning
BII in wide meaning
Bank - insurance Integration Level
United
resourses
Kind of bank-insurance
interaction
Agent’s agreements
Cooperation of bank
and insurance
activity
Integration is
absent

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2259 The Clute Institute
Accounting of each from nine indexes gives the possibility to estimate the level of bank-insurance integration
in wide sense, particularly as the process of capital consolidation (participation in capital) of banks and insurance
companies or the joint using of their informational, technological, human resources, managerial and other
resources while implementing mutual functions, the result of which is the achievement of the given subjects the
definite positive (negative) synergetic effect (micro level) and changing the character of financial sector
development (macro level).
The question of determination of qualitative characteristic of bank-insurance integration level and their
maximum limits is very important and practically essential. Segregation of four BII levels is proposed in this
research. It has the following gradation: low, middle, heightened, high. In this case interval’s distribution fits the
existing in econometrics and statistics [Hastie et. al (2008)] approach, which concerns the definition of maximum
limits for estimation of tightness of interrelation among factors’ attributes and effective index: [0 - 0,3) – the
connection is poor (low BII level); [0,3 - 0,5) – noticeable connection (middle BII Level); [0,5 - 0,7) – close
connection (heightened BII level); [0,7 - 1,0] – strong connection (high BII level). The exceptions are only the
maximum limits of the second group indicators, such as x6, x7, x8, which is explained in the following way.
Indicators of life insurance sphere. Taking into account the world experience of bank-insurance organizing,
the maximum value of bancassurance share in gross insurance bonuses on life insurance during 1999-2009 was
typical for Portugal and reached «0,88» (Kozmenko and Bagmet, 2011). The level of bank-insurance market in this
country is considered to be high according to practitioners and theorists views. On this bases we can assume that the
maximum value of index x6 can be equal to «0,90». This value can be higher in theory, but it is necessary to consider
the presence of other non-banking channels of insurance products distribution, such as: direct sales by the insurance
companies’ assistants (office method), agents, brokers.
The other index is the share of mathematical reserves placed at deposit accounts in banks, as bank metals,
including at the current and saving (deposit) accounts in bank metals. The maximum value of the marginal limit of
the index x8 is chosen at the level «0,85». It is connected with the existing legislative limitations concerning the
possible volumes of insurance reserves placement on life insurance. So, according to the Directive of the National
Commission that executes the state regulation in sphere of financial services of Ukraine «The Rules of Placement of
Insurance Reserves on Life Insurance» № 2875 dating from 11.26.20041 insurance companies may place at the bank
deposits not more than 70% insurance reserves, in bank metals not more than 15%.
Indexes in risk insurance sphere. The maximum value of bancassurance share in gross insurance bonuses on
risk insurance is offered to be at the level «0,80», which considers the real maximum value of such index in
European countries (Italy, Spain) (Kozmenko and Bagmet, 2011). Thus, theoretically the x7 index can take values in
the range «0,90-1,00», though it has never been observed in any country, because of higher level of distribution of
life insurance products. Because of absence of legislative limits in Ukraine according to the volumes of insurance
reserves placement in other kinds of insurance, than life insurance2, the marginal maximum value of technical
reserves share, placed in deposit bank accounts and in bank metals (x9) is offered to set at the level «1,00».
At the second stage the quantitative estimation of each from nine indexes is conducted (х1 ... х9) and
identification of interconnection of the qualitative value of i-indicator (low, middle, heightened, high) with the
corresponding BII level (low, middle, heightened, high) the results of which are presented in the Figure 5.
1 About the Rules of Placement of Insurance Reserves on Life Insurance [Еelectronic resource] / the Direction of the National Commission for
regulating of financial services dated from 26.11.2004, №2875: http://zakon1.rada.gov.ua/laws/show/z0948-09.
2 About the Rules of Placement of Insurance Reserves on Non-Life Insurance [Еelectronic resource] / the Direction of the National Commission
for regulating of financial services dated from 20.05.2010, №422: http://zakon1.rada.gov.ua/laws/show/z0373-10.

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2260 The Clute Institute
Figure 5. Identification of interconnection among quality estimations of individual indicators and BII level
Qualitative estimation of indicator
Integration Level
Low
Middle
Heightened
High
x1
Low
1
0
0
0
Middle
0
1
0
0
Heightened
0
0
1
0
High
0
0
0
1
x2
Low
1
0
0
0
Middle
0
1
0
0
Heightened
0
0
1
0
High
0
0
0
1
x3
Low
1
1
0
0
Middle
0
1
1
0
Heightened
0
0
1
1
High
0
0
0
1
x4
Low
1
0
0
0
Middle
0
1
0
0
Heightened
0
0
1
0
High
0
0
0
1
x5
Low
1
1
1
1
Middle
0
1
1
0
Heightened
0
0
1
1
High
0
0
0
1
x6
Low
1
0
0
0
Middle
0
1
1
1
Heightened
0
0
1
1
High
0
0
1
1
x7
Low
1
0
0
0
Middle
0
1
1
0
Heightened
0
0
1
1
High
0
0
1
1
x8
Low
1
0
0
0
Middle
1
1
0
0
Heightened
0
0
1
1
High
0
0
1
1
x9
Low
1
0
0
0
Middle
1
1
0
0
Heightened
0
1
1
1
High
0
1
1
1
The aggregate values in table 2 can be presented as the matrix T, each element of which (depending from
which interval has the i-indicator value) presents binary characteristics (tij) «1» or «0» (formula (1), (2)).
(1)
(2)
The first index x1 characterizes the specific weight of the total volume of capital of banks and insurance
companies that compose the integrational associations, in total volume of all Ukrainian banks and insurance
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The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2261 The Clute Institute
companies. This index is the most important for the estimation, because it allows to demonstrate the real BII level
according to the definition given in the research in narrow meaning. That is why, if the value of this index is in the
limits of interval «low», the level BII in financial sector of the country cannot be middle, heightened or high. It is
shown in the table 2, that if x1 would be characterized as «low» BII level would be low too and get a binary
characteristic «1». Conformably, if the meaning of the given indicator is high, BII level in the country can be
characterized as «high», or «heightened». But this does not prove the absence of the necessity in considering of
other eight indexes (x2-x9), because each of them has the supplementing character to the general value and helps to
estimate BII level more accurate in wide sense.
The second in priority is the indicator of specific weight of the total volume of assets of bank and insurance
companies that comprise the integration association in total volume of assets of all banks and insurance companies
of the Ukraine. The necessity of its including into the system of LBII estimation indicators is conditioned by the
following. Firstly, the volume of banks and insurance companies’ assets exceeds the their capital volumes, so the
calculation of x2 index permits more accurate determination of the actual level of integration interaction among
financial intermediaries. Secondly, the taken index helps to examine bank-insurance integration from the point of
view of depositing of own resources by banks and insurance companies.
The necessity of including into the system of BII level estimation and the x3 indicator (specific weight of
banks and insurance companies quantity that comprise integrational financial groups in total quantity of all banks
and insurance companies) is conditioned by:
(1)!The participation of systemic banks and top-20 insurance companies in integration processes can cause
high values of x1 and x2 indicators, considering high level of asset and capital concentration of such
financial intermediaries, that finally can lead to the heightening of integral meaning of BII level index;
(2) Theoretically the great amount of banks of the third (small) and the fourth (the smallest) groups according
to the classification of the National Bank of Ukraine can take part in integration processes, and also captive
insurance companies, which may have such level of effectiveness that may not influence on BII level,
taking into account low values of the first two indicators in such case.
The identification of interrelation of each qualitative estimation (low, middle, heightened, high meaning) of
x6 index (share in bancassurance in gross insurance bonuses of life insurance) and x7 index (share in bancassurance
in gross insurance premiums of risk insurance) with the corresponding BII level (low, middle, heightened, high)
needs more detailed explanation. Thus, for example, if the values of these indexes are low, the level of bank-
insurance integration cannot be high or heightened. Thus, at the availability of great amount of financial groups the
share of bancassurance in gross insurance premiums on risk insurance (more seldom in life insurance) will be
characterized by heightened or high values. From the other side in case of high or heightened estimations of the
mentioned above indexes the level of bank-insurance integration cannot be low theoretically. As a rule, if the
country’s share in bancassurance is more than 50% in average around the financial sector, it proves the presence of
big financial groups, which provide complex bank-insurance products.
The third stage supposes the generalization of interconnection estimation of the value of i-indicator with BII
level. Matrix С is formed with this aim, every value of which (cij) is equal to the sum of binary characteristics of
four quantitative estimations of corresponding index (3).

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2262 The Clute Institute
, де (3)
The fourth stage. Considering different character and force of impact of each from nine indexes on the BII
level, it is reasonable to determine weight coefficients, (αi, i = 1 ÷ 9). On the base of linear programming there was
made the calculation of nine weight coefficients at the base of enumeration of present system of limitation (4).
(4)
The real values of weight coefficients are presented in the Figure 6.
Figure 6. Weight coefficient of BII level value index
Weight coefficient
α1
α2
α3
α4
α5
α6
α7
α8
α9
Meaning
0,21
0,17
0,15
0,11
0,08
0,08
0,1
0,05
0,05
The fifth stage supposes the determination of the maximum values which can be achieved in the conditions of
high rates of all indexes (x1 – x9) LBII (5).
(5)
At the sixth stage the quantitative estimation and quantitive interpretation of the actual LBII are made (Figure
2).
RESULTS
Let’s make the estimation of the bank-insurance integration level in Ukraine on the base of proposed
methodological approach. The specific of examining integration process in Ukraine is absence of statistical
information and consolidating accountability of bank activities and insurance companies. This complicates the
analyses of modern condition of bank-insurance integration and is one of the sharpest problems. Statistical base of
research during 2002-2013 is formed in the Figure 7 on the base of sources 3;4;5;6 and authors’ calculation. The
3 Data of financial documentation of Banks in the Ukraine. Official site of the National Bank of Ukraine: http://www.bank.gov.ua/control/uk/
publish/category?cat_id=74208 (01.08.2014)
4 Annual statement National Commercial Financial Service [Electronic resource ] http://www.dfp.gov.ua/734.html
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The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2263 The Clute Institute
objects of the research are twenty-five banks and twenty-six insurance companies – members of financial groups
and active participants of bancassurance in Ukraine during the studying period (see Figure 8). The fragment of
calculating of the integral index of the bank-insurance integration level in 2008, when it was characterized as the
highest. Summarized value of interrelation of qualitative estimation of i-indicator LBII with the BII level in 2008 is
presented as a matrix «с» (6).
Substituting the elements of this matrix into the formula of LBII calculationaccording to the Figure 2, we’ll get:
LBII = α1×0 + α2×0 + α3×0 + α4×1 + α5×0 + α6×1 + α7×1 + α8×1+ α9×1 = 0,11 + 0,08 + 0,08 + + 0,1 + 0,05
+ 0,05 = 0,47.
The results of estimation evidence the low level of bank-insurance integration in the Ukraine, the values of
which during 2002-2013 varied from 0,19 to 0,47. The quantitative estimation and qualitative interpretation of the
estimation of bank-insurance integration level in Ukraine are presented in the Figure 8.
Figure 7. Dynamics of values of bank-insurance integration in Ukraine during 2002-2013
Year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Value
0,19
0,19
0,24
0,24
0,24
0.29
0,47
0,19
0,11
0,08
0,11
0,19
Quantitative
estimation
Low BII Level
Middle BII
Level
Low BII Level
The results of calculation show that in 2008 bank-insurance integration level was characterized as high
during the analyzed period. Thus, active credit portfolio growth was accompanied by the widening of insurance
companies activity in the sphere of financial risks insurance, mortgage objects and life insurance of banks’
borrowers till June 2008 (crises started in October-November 2008). Besides, on peak of economics in the Ukraine,
financial intermediaries used bank-insurance very actively aiming to increase profit of their own business.
From the one side, it is possible to assume that such level is not threatening for financial sector of the
Ukraine. But the 2008 crisis consequences proved the existence of the essential dependence between the
effectiveness of banks and insurance companies’ activity. It means that even in the conditions of low BII level at the
phases of decay and crisis in economics the interaction of financial intermediaries in the form of bancassurance may
be risky for insurance companies in the Ukraine.
5 Statistics of Ukrainian Banks Association [Electronic recourse]: http://aub.org.ua/index.php?option=com_\content&task=view&id=
87&menu=104&Itemid=96
6 Statistics of Insurance Market of Ukraine [Electronic recourse] /: http://forinsurer.com/stat/
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The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2264 The Clute Institute
Figure 8. Statistical base of the estimation of the bank-insurance integration level in Ukraine during 2002 -2013
Index
Year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Quantity of banks
157
157
160
163
169
173
182
179
175
175
175
179
Quantity of banks - BII
participants
23
23
23
23
25
22
22
22
21
20
20
21
Quantity of insurance
companies
338
357
387
398
407
446
469
469
456
445
414
407
Quantity of insurance
companies - BII participants
12
14
15
19
22
22
22
19
18
18
19
19
(x1)
0,3072
0,2842
0,2964
0,3196
0,3623
0,3615
0,3844
0,3169
0,2956
0,3280
0,3304
0,3345
(x2)
0,4997
0,5097
0,4994
0,5229
0,5399
0,5282
0,5626
0,5066
0,5059
0,4974
0,5012
0,5098
(x3)
0,0707
0,0720
0,0695
0,0749
0,0816
0,0711
0,0676
0,0633
0,0618
0,0613
0,0662
0,0683
(x4)
0,7000
0,7000
0,7000
0,7000
0,7000
0,8000
1,0000
1,0000
1,0000
1,0000
1,0000
1,0000
(x5)
0,0000
0,0000
0,0000
0,0000
0,0000
0,0000
0,0000
0,0000
0,0000
0,0000
0,0000
0,0000
(x6)
0,0560
0,0562
0,0600
0,0640
0,0723
0,0834
0,1150
0,0570
0,0594
0,0620
0,06572
0,0756
(x7)
0,1200
0,1600
0,1840
0,2350
0,2540
0,3100
0,3320
0,1745
0,1934
0,2635
0,2772
0,2803
(x8)
0,3551
0,3670
0,4437
0,4698
0,5075
0,5176
0,5248
0,3739
0,3290
0,3356
0,3557
0,3635
(x9)
0,2414
0,2027
0,188
0,4794
0,4618
0,4878
0,510
0,3565
0,3689
0,3437
0,3576
0,3647

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2265 The Clute Institute
Figure 9. Bank and insurance companies – participants of BII in Ukraine during 2002-2013.
№
п/п
Banks
№
Insurance companies
1
OJSC «Dongobank»
1
LTD «Veksel»
2
OJSC «PUMB»
2
PSS IC «Аlfa-Insuarance»
3
OJSC «CreditPromBank»
3
PSS IC «Brokbusiness»
4
OJSC «Credit-Dnipro»
4
ЗАО СК «VAB Insurance»
5
OJSC «Ukrsotsbank к»
5
PSS IC «Delta Life»
6
OJSC «PrivatBank»
6
PSS IC «Renaissance»,
7
OJSC «Prominvestbank»
7
PSS IC «Аrcade-Garant»
8
OJSC «Riffizen Bank Aval»
8
ЗАО «VAB Life»
9
OJSC «Svedbank»
9
PSS IC «Renaissance Life»
10
OJSC «ТАS-investbank»
10
LTD «УАSК АSКА»
11
OJSC «Big-energy»
11
NASK «Оranta»
12
OJSC «Pervy Investisionny Bank»
12
PSS IC «Etalon»
13
LTD «Ukraine creditny bank»
13
LTD «ТАS»
14
OJSC «Hreschatic»
14
SS «ТАS»
15
OJSC «Ukrsibbank»
15
IC «Sky-Vest»
16
OJSC «Nadra»
16
PSS IC «АHА Insurance»
17
OJSC «Basis»
17
PSS IC «АHА Ukraine»
18
OJSC «VTB Bank»
18
PSS IC «Kardif»
19
OJSC «VAB bank»
19
LTD IC «Kardif Life»
20
OJSC «Brokbusiness bank»
20
IC «General Garant»
21
OJSC «Bank RenaissanceCapital»
21
LTD IC «General Garant Insurance of Life»
22
OJSC «ОТP Bank»
22
PSS IC «Unica life»
23
OJSC «Аlfa-Bank»
23
PSS IC «SEB Life Ukraine»
24
OJSC «Delta Bank»
24
IC «ТАS-capital»
25
OJSC «Аrkada»
25
LTD «American company of life AIG Life»
26
PSS IC «Аlico Ukraine»
CONCLUSION
We apply the methodological approach to examine the level of bank-insurance integration in Ukraine
during the period 2002-2013 using the calculation of integral index. We note that banks and insurance companies
are the greatest and strongest financial intermediaries in the Ukraine. Our findings show a low BII level in Ukraine
in 2002-2013, which could be explained by:
a. legislative problems: mainly weakness of effective regulating and supervision, law supporting of the
activity of banks and insurance companies in the structure of integration financial groups;
b. conjectural problems: high level of dependence of insurance companies from banks; discrepancy of
volumes of insurance dealership to banks; financial insolvency of insurance to take for insurance banks
risks, characterizing by great loss;
c. problems of comparability of informational and technological sphere of banks and insurance companies,
related to low automation level of business processes of insurance companies in comparison with banks;
technical SOFT of banks does not include insurance products sale;
d. problems in sphere of interactions with clients: the accreditation of insurance companies in banks is not
clear enough.
Solving of the mentioned above problems demands: 1) evolution of legislative base of financial groups
activity regulation; 2) regulation of connections between insurance companies and insurance agents (banks) on the
base of delivered open and pure accreditation insurance companies in banks; 3) implementation of mechanism of
netting insurance companies money resources, which are placed on bank's deposits during moratorium for their
anticipatory taking of, and assets of bank-beneficiary according to the insurance contract as homogenious opposite
demands; 4) introduction of intermediate financial accountability for insurance companies, with obligatory

The Journal of Applied Business Research – November/December 2015 Volume 31, Number 6
Copyright by author(s); CC-BY 2266 The Clute Institute
information demonstration connected with the volume of insurance premiums, gathered according to the each type
of insurance (life or non-life) through bank distribution channel; 5) step by step introduction of European parliament
and Soviet of Europe directions Basel II, Basel III, in particular, counter cycling buffer of capital; 6) development of
prudential and macro-prudential control of banks and insurance companies' activity. Realization of such events will
let to enroll the possibilities of the Ukrainian insurance companies and banks' consolidation from one side (it means
the level of their safe integration for financial sector functioning) but not to let the expansion of negative
consequences from the other side in bank functioning connected with insurance companies activity, and also will
help to the effective regulation of financial groups activity and providing a stable functioning of the financial sector
in the economic in whole.
AUTHOR INFORMATION
Kseniya Bagmet. Areas of research: banking, insurance, integration process. She worked as Assistant to the Rector
at Ukrainian academy of banking of the National bank of Ukraine.
Faten Ben Bouheni is Professor of Finance at ISC Paris Business School and Researcher at LITEM research
laboratory in France. Her research focuses on financial institutions, with special emphasis on regulatory and
supervisory issues.
Hassan Obeid is a head of Finance & Accounting department at European Business School – Paris, his areas of
research include company performance, bank efficiency, ICT and privatization. He is a member of the editorial
board for academic journals. He has worked for AACSB accredited universities such as United Arab Emirates
University and IESEG.
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NOTES