Do global uncertainties impede insurance activity? An empirical evidence from top two economies

Danish Ahmed, Hu Xuhua, Michael A. Goldstein and Yuantao Xie

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: Insurance companies have long-dated assets and liabilities, so their balance sheets are very sensitive to large changes in risk. Using global investor confidence, oil price uncertainty, world pandemic uncertainty and world uncertainty as proxies for global uncertainties, we examine the influence of global uncertainties on insurance activities in China and US to explain their interdependence and causality from 1992 to 2022. Running continuous wavelet transforms and wavelet coherence analysis, we found that while life and non-life insurance activity in Chinese and American market lags investor confidence and pandemic uncertainty, only non-life insurance activity in the US leads world uncertainty. Since the relation does not hold for their Chinese counterpart, this is not a global effect. Furthermore, the nexus between Chinese and American life insurance activity and oil price uncertainty is insignificant. We conclude that insurance activities in China and US adhere to demand-following hypothesis.

Keywords: Insurance activity; Investor confidence; Oil price; Pandemic; Uncertainty; Volatility (search for similar items in EconPapers)
JEL-codes: E2 E3 E7 G22 L1 L8 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007657

DOI: 10.1016/j.frl.2024.105735

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