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Currency Uncertainty, Interest Guarantee and Risk-Based Premiums in Life Insurance Guaranty Schemes under the Impact of the COVID-19 Pandemic
insurance guaranty fund
interest rate volatility
exchange rate volatility
|Issue Date: ||2020-09-02 11:51:20 (UTC+8)|
The life insurance industry is a highly financially leveraged industry. To ensure Taiwan life insurance companies can support policyholders with long-term payment obligations, they choose to invest in the long-term fixed income in the market. Due to the low interest rate environment in Taiwan, they increase their investments in offshore assets to reach their financial goal. However, the coronavirus outbreak is dramatically increasing all over the world. The economy of many countries is impacted. The Fed have lowered the federal funds rate to 0%-0.25%. The profit of life insurance companies is strongly affected, which implies that the life insurance companies are in the strong effects on the risk of interest and exchange rate.
This paper studies the fair premiums in life insurance guaranty schemes. We value the asset and liability of the company with a stochastic model, considering the impacts of each factor on the fair price of the guaranty fund. We want to figure out the default risk for a life insurance company under different asset allocations and regulatory standards.
We find that: (1) Due to coronavirus outbreak, the premium increases. (2) With the increase of foreign interest rate volatility and exchange rate volatility, the premium increases. (3) The sensitivity of the premium to the ratio of foreign investment increases as the ratio of foreign investment increases. (4) The sensitivity of the premium to the exchange volatility and foreign rate volatility increase, respectively, when the exchange rate volatility increases.
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|Source URI: ||http://thesis.lib.nccu.edu.tw/record/#G0107358027|
|Data Type: ||thesis|
|Appears in Collections:||[風險管理與保險學系 ] 學位論文|
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