publication . Article . Research . 2019

Interest Rate Risk of Life Insurers: Evidence from Accounting Data

Axel Möhlmann;
Open Access
  • Published: 19 Nov 2019 Journal: SSRN Electronic Journal (eissn: 1556-5068, Copyright policy)
  • Publisher: Elsevier BV
Abstract
Life insurers are exposed to interest rate risk, and their liability side is typically more sensitive to interest rate changes than their asset side. This paper develops an accounting-based measure of interest rate sensitivity. My approach uses the coexistence of historical cost and market value accounting, which permits the observation of valuations for different discount rates. Using microdata, I show that German life insurers have a significant exposure to interest rate risk. However, there is a wide dispersion across the sector. I find that insurers' size, growth and solvency are negatively correlated with interest rate risk. The heterogeneity suggests that ...
Subjects
Medical Subject Headings: health care economics and organizations
free text keywords: E43, G11, G22, life insurance, interest rate risk, asset liability management, duration gap, ddc:330, Economics and Econometrics, Accounting, Finance, Market value, Economics, business.industry, business, Risk-free interest rate, Valuation (finance), Interest rate, media_common.quotation_subject, media_common, Actuarial science, Historical cost, Liability
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publication . Article . Research . 2019

Interest Rate Risk of Life Insurers: Evidence from Accounting Data

Axel Möhlmann;