Asset-liability management in life insurance: Evidence from France

Victor Lyonnet ()
Additional contact information
Victor Lyonnet: CREST; HEC Paris

No 2018-12, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper studies the asset-liability management of life insurers. We start with a life insurance investor’s problem of the optimal date to redeem; as a function of taxes and rates of return. The model predicts that life insurers whose investors’ contract age is relatively young should be more exposed to redemption risk. We then build a novel confidential dataset and test whether life insurers’ portfolio choice is responsive to redemption risk. Using different measures of redemption risk and controlling for year fixed effects; we find that a one standard deviation increase in redemption risk is associated with an average decrease in the share of directly-held stocks by 2.3% or slightly more than one-half of its standard deviation (4.5%). This result remains valid when accounting for indirect stock investment through funds. Finally; we check our model’s prediction that redemption risk depends on insurers’ investor contract age and use this to propose and exogenous measure of redemption risk and make a causal attempt.

Keywords: Insurance companies; life insurance; surrender risk; redemption risk. (search for similar items in EconPapers)
JEL-codes: G22 G28 G32 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-08-05
New Economics Papers: this item is included in nep-ias and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://crest.science/RePEc/wpstorage/2018-12.pdf CREST working paper version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:crs:wpaper:2018-12

Access Statistics for this paper

More papers in Working Papers from Center for Research in Economics and Statistics Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Murielle Jules Maintainer-Email : murielle.jules@ensae.Fr.