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Intergenerational Risk Sharing in Life Insurance: Evidence from France

J. Hombert and V. Lyonnet

Débats économiques et financiers from Banque de France

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; euro contracts. (search for similar items in EconPapers)
JEL-codes: G20 G22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-ias
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:decfin:30

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