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Optimal asset allocation in life insurance : the impact of regulation

Recurso electrónico / Electronic resource
Registro MARC
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100  ‎$0‎MAPA20080649999‎$a‎Chen, An
24510‎$a‎Optimal asset allocation in life insurance‎$b‎: the impact of regulation‎$c‎An Chen and Peter Hieber
520  ‎$a‎In 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.
7001 ‎$0‎MAPA20160014259‎$a‎Hieber, Peter
7730 ‎$w‎MAP20077000420‎$t‎Astin bulletin‎$d‎Belgium : ASTIN and AFIR Sections of the International Actuarial Association‎$x‎0515-0361‎$g‎01/09/2016 Volumen 46 Número 3 - septiembre 2016 , p. 605-626