Interest rate risk of life insurers: Evidence from accounting data

Axel Möhlmann

No 10/2017, Discussion Papers from Deutsche Bundesbank

Abstract: Life insurers are exposed to interest rate risk, and their liability side is typically more sensitive to interest rate changes than their asset side. This paper develops an accounting-based measure of interest rate sensitivity. My approach uses the coexistence of historical cost and market value accounting, which permits the observation of valuations for different discount rates. Using microdata, I show that German life insurers have a significant exposure to interest rate risk. However, there is a wide dispersion across the sector. I find that insurers' size, growth and solvency are negatively correlated with interest rate risk. The heterogeneity suggests that insurers would behave differently during times of stress, which has important implications for understanding the macroprudential risks to which the sector is exposed.

Keywords: life insurance; interest rate risk; asset liability management; duration gap (search for similar items in EconPapers)
JEL-codes: E43 G11 G22 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-dcm, nep-ias and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Interest rate risk of life insurers: Evidence from accounting data (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:102017

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