Optimal asset allocation in life insurance : the impact of regulation

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<title>Optimal asset allocation in life insurance</title>
<subTitle>: the impact of regulation</subTitle>
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<namePart>Hieber, Peter</namePart>
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<abstract displayLabel="Summary">In a typical equity-linked life insurance contract, the insurance company is entitled to a share of return surpluses as compensation for the return guarantee granted to the policyholders. The set of possible contract terms might, however, be restricted by a regulatory default constraint  a fact that can force the two parties to initiate sub-optimal insurance contracts. We show that this effect can be mitigated if regulatory policy is more flexible. We suggest that the regulator implement a traffic light system where companies are forced to reduce the riskiness of their asset allocation in distress. In a utility-based framework, we show that the introduction of such a system can increase the benefits of the policyholder without deteriorating the benefits of the insurance company. At the same time, default probabilities (and thus solvency capital requirements) can be reduced.</abstract>
<note type="statement of responsibility">An Chen and Peter Hieber</note>
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<title>Astin bulletin</title>
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<publisher>Belgium : ASTIN and AFIR Sections of the International Actuarial Association</publisher>
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<identifier type="issn">0515-0361</identifier>
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<text>01/09/2016 Volumen 46 Número 3 - septiembre 2016 , p. 605-626</text>
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