Intergenerational Risk Sharing in Life Insurance: Evidence from France

Johan Hombert () and Victor Lyonnet ()

No 1237, HEC Research Papers Series from HEC Paris

Abstract: We study intergenerational risk sharing in Euro-denominated life insurance contracts. These savings products represent 80% of the life insurance market in Europe. Using regulatory and survey data for the French market, which is €1.3 trillion large, we analyze the patterns of intergenerational redistribution implemented by these products. We show that contract returns are an order of magnitude less volatile than the return of assets underlying these contracts. Contract return smoothing is achieved using reserves that absorb fluctuations in asset returns and that generate intertemporal transfers across generations of investors. We estimate the average annual amount of intergenerational transfer at 1.4% of contract value, i.e., €17 billion or 0.8% of GDP. Finally, we provide evidence that smoothing makes contract returns predictable, but inflows react only weakly to these predictable returns.

Keywords: Life insurance; intergenerational risk-sharing (search for similar items in EconPapers)
JEL-codes: G20 G22 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2017-11-01, Revised 2017-11-29
New Economics Papers: this item is included in nep-ias
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Citations: View citations in EconPapers (14)

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