The effect of inflation on US insurance markets: A Markov-switching model analysis

Georges Dionne (), Akouété-Tognikin Fenou () and Mohamed Mnasri ()
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Akouété-Tognikin Fenou: HEC Montreal, Canada Research Chair in Risk Management
Mohamed Mnasri: HEC Montreal, Department of finance

No 25-2, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: We analyze the characteristics of the U.S. inflation rate series observed over the 1973-2023 period in order to capture and model the effect of inflation on the insurance industry. Two important conclusions emerge from the data: The US inflation rate series is characterized by a random trend and non-linear dynamics (asymmetry). These results led us to select the two-regime Markov-switching model to study the impact of inflation on various fundamental indicators of insurance industry performance in the US. We show that performance indicators are differently affected by inflation in the Life and P&C insurance sectors according to the inflation regime considered.

Keywords: Inflation; US insurance industry; Markov model; COVID-19; Life insurance; P&C insurance (search for similar items in EconPapers)
JEL-codes: B22 E30 E40 G22 G52 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2025-03-07
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2025_002

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