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dc.creatorBerdin, Elia
dc.creatorGründl, Helmut
dc.date.accessioned2021-11-02T10:13:47Z
dc.date.available2021-11-02T10:13:47Z
dc.date.issued2015-01-01
dc.identifier.urihttps://fiftest.hebis.de/xmlui/handle/123456789/4637
dc.description.abstractLow interest rates are becoming a threat to the stability of the life insurance industry, especially in countries such as Germany, where products with relatively high guaranteed returns sold in the past still represent a prominent share of the total portfolio. This contribution aims to assess and quantify the effects of the current low interest rate phase on the balance sheet of a representative German life insurer, given the current asset allocation and the outstanding liabilities. To do so, we generate a stochastic term structure of interest rates as well as stock market returns to simulate investment returns of a stylized life insurance business portfolio in a multi-period setting. Based on empirically calibrated parameters, we can observe the evolution of the life insurers' balance sheet over time with a special focus on their solvency situation. To account for different scenarios and in order to check the robustness of our findings, we calibrate different capital market settings and different initial situations of capital endowment. Our results suggest that a prolonged period of low interest rates would markedly affect the solvency situation of life insurers, leading to a relatively high cumulative probability of default, especially for less capitalized companies. In addition, the new reform of the German life insurance regulation has a beneficial effect on the cumulative probability of default, as a direct consequence of the reduction of the payouts to policyholders.
dc.rightsAttribution-ShareAlike 4.0 International
dc.rights.urihttp://creativecommons.org/licenses/by-sa/4.0/
dc.subjectFinancial Institutions
dc.titleThe Effects of a Low Interest Rate Environment on Life Insurers
dc.typeWorking Paper
dcterms.referenceshttps://fiftest.hebis.de/xmlui/handle/123456789/4915?Bundesbank
dcterms.referenceshttps://fiftest.hebis.de/xmlui/handle/123456789/4900?BaFin
dcterms.referenceshttps://fiftest.hebis.de/xmlui/handle/123456789/4978?GDV
dcterms.referenceshttps://fiftest.hebis.de/xmlui/handle/123456789/4898?Assekurata
dcterms.referenceshttps://fiftest.hebis.de/xmlui/handle/123456789/4939?Datastream
dc.identifier.safeno65
dc.subject.keywordslife insurers
dc.subject.keywordsminimum return guarantees
dc.subject.keywordslow interest rates
dc.subject.keywordsrisk assessment
dc.subject.keywordssolvency ii
dc.subject.jelG22
dc.subject.jelG23
dc.subject.jelG17
dc.subject.jelE58
dc.subject.topic1wpr
dc.subject.topic1yield
dc.subject.topic1simulation
dc.subject.topic2product
dc.subject.topic2surrender
dc.subject.topic2management
dc.subject.topic3higher
dc.subject.topic3minimum
dc.subject.topic3keyword
dc.source.filename65_SSRN-id2517197
dc.subject.topic1nameConsumption
dc.subject.topic2nameHousehold Finance
dc.subject.topic3nameStability and Regulation
dc.identifier.doi10.2139/ssrn.2517197


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Attribution-ShareAlike 4.0 International
Except where otherwise noted, this item's license is described as Attribution-ShareAlike 4.0 International