How Do Life Insurers Respond to a Prolonged Low Interest Rate Environment? A Literature Review

Wilaiporn Suwanmalai and Simon Zaby
Additional contact information
Wilaiporn Suwanmalai: College of Management, Mahidol University, Bangkok 10400, Thailand
Simon Zaby: College of Management, Mahidol University, Bangkok 10400, Thailand

Risks, 2022, vol. 10, issue 8, 1-16

Abstract: Life insurers, whose contractual liabilities include providing minimum guaranteed interest rates to policyholders, are significantly affected by persistently low interest rates. Hence, this study reviews the literature on the prolonged low interest rate environment and its impact on the life insurance industry, incorporating multiple perspectives and practices in different countries. The effect of low interest rates on life insurance products depends on the sensitivity of the interest rate of each product type and the level of minimum interest rate guarantee. In addition, their impacts on the valuation of life insurance companies depend on shifts in the valuation interest rate, which is used to discount the present value of future benefits, as well as the financial and solvency issues faced by insurers. Overall, the literature suggests that insurers need both short- and long-term solutions to respond to a prolonged low interest rate environment.

Keywords: literature review; low interest rate; minimum interest rate guarantee; life insurance valuation; low interest rate financial impact; insurer solvency; corporate finance; interest rate risk (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/10/8/155/pdf (application/pdf)
https://www.mdpi.com/2227-9091/10/8/155/ (text/html)

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:gam:jrisks:v:10:y:2022:i:8:p:155-:d:878152

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().