Portfolio optimization of euro-denominated funds in French life insurance

Runsheng Gu (), Lioudmila Vostrikova () and Bruno Séjourné
Additional contact information
Runsheng Gu: GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage
Lioudmila Vostrikova: LAREMA - Laboratoire Angevin de Recherche en Mathématiques - UA - Université d'Angers - CNRS - Centre National de la Recherche Scientifique
Bruno Séjourné: GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage

Working Papers from HAL

Abstract: In this paper, we study a portfolio optimization problem related to the asset management of life insurance companies. In a persistent low-interest-rate environment, the conditions under which the life insurance business operates are modified. To continue to offer a favorable return to the insured, life insurers should allocate more risky assets to their portfolio. But, doing so, they would be exposed to not being able to guarantee the capital. Besides, the maturity of the life insurance market creates potential conditions for massive withdrawals. We address those risk exposures by applying ruin models. We obtain formulae for the first two moments of the value of a life insurance company, depending on its activity and investment strategy. We show that the optimal asset allocation strategies can differ considerably for small changes in certain parameters of the insurer's business: the probability of insolvency, the level of guaranteed capital, and the premium rate.

Keywords: life insurance; portfolio optimization; low interest rates; ruin theory (search for similar items in EconPapers)
Date: 2020-11-26
New Economics Papers: this item is included in nep-ias and nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-03025191
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-03025191/document (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:hal:wpaper:hal-03025191

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().