Prague Economic Papers 2021, 30(1):20-36 | DOI: 10.18267/j.pep.752

Does Distribution Growth Affect the Insurers' Asset Allocation in Life Insurance? The Case of Central Europe

Jiří Šindelář ORCID...a, Michal Erbena
a University of Finance and Administration Prague, Czech Republic

This paper deals with the effects of distribution stress and macroeconomic factors on the composition of life insurance investment portfolios on the Central European market. Using a wide array of variables and the VAR model as our main method, we have found that a strong majority of insurers react to external shocks, induced by high levels of contract turnover or positive changes in macro-variables such as GDP and inflation, by strengthening bond components of their portfolio. The exception is connected to interest rates (two-week repo), which presumably have a negative effect on bond investments. Other components such as shares, funds and cash positions have been affected in a diverse way, yet to a minor extent. This implies that insurers tend to react to external stressors by beefing up the conservative part of their investments, potentially leading to an underperformance of managed assets. As such, our results point to conceivable regulatory implications, which would prevent those secondary negative detriments of life distribution growth (i.e., reselling), which are to be expected on the surveyed market.

Keywords: Life insurance, life investments, distribution growth, insurance reselling, macroeconomic factors
JEL classification: C32, G11, G22

Received: February 10, 2019; Revised: February 18, 2020; Accepted: April 29, 2020; Prepublished online: September 9, 2020; Published: February 4, 2021  Show citation

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Šindelář, J., & Erben, M. (2021). Does Distribution Growth Affect the Insurers' Asset Allocation in Life Insurance? The Case of Central Europe. Prague Economic Papers, 30(1), 20-36. doi: 10.18267/j.pep.752
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