Life Insurance Policy Loans, Technology Choices, and Strategic Asset-liability Matching Management

Xuelian Li, Yuxin Xie and Jyh-Horng Lin

Emerging Markets Finance and Trade, 2022, vol. 58, issue 7, 1838-1847

Abstract: We develop a two-stage contingent claim model to evaluate a life insurer’s equity. The model sequentially determines the optimal guaranteed rate and the optimal technology choice for strategic asset-liability matching management. We show that increases in policy loans decrease the insurance businesses at a reduced guaranteed rate. The shrinking life insurance businesses discourage the insurer from using advanced technology. However, we find that an increase in advanced technology involvement enhances insurance businesses at an increased guaranteed rate. An increase in the policy loan also increases the policyholder protection when considering the optimal guaranteed rate and technology choice strategies.

Date: 2022
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DOI: 10.1080/1540496X.2021.1937117

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