This research studies the relationships between the two sides of life insurers’ balance sheet and investigates whether and how they changed during recent past years, when European Central Bank monetary policy drove market rates to unprecedented low levels. By using a canonical correlation analysis, we study the internal structure of the links within and between the asset and liability sides of 24 major European Union (EU) life insurers’ balance sheets over the 2007–2015 time horizon. We find strong and substantial evidence that life insurers’ assets and liabilities have become more independent over time. We argue that the declining trend of market interest rates has contributed to the generalized reduction in the linkage between the asset side and the liability side of EU life insurers, and has made insurance companies more exposed to ALM-related risks relative to the period before the financial crisis.

Financial intermediaries' asset-liability dependency and low-interest-rate environment: evidence from EU life insurers / Curcio, Domenico; Borri, Nicola; Cerrone, Rosaria; Cocozza, Rosa. - In: JOURNAL OF FINANCIAL MANAGEMENT, MARKETS AND INSTITUTIONS. - ISSN 2282-717X. - 7:1(2019), pp. 1-25. [10.1142/S2282717X19400036]

Financial intermediaries' asset-liability dependency and low-interest-rate environment: evidence from EU life insurers

Nicola Borri;
2019

Abstract

This research studies the relationships between the two sides of life insurers’ balance sheet and investigates whether and how they changed during recent past years, when European Central Bank monetary policy drove market rates to unprecedented low levels. By using a canonical correlation analysis, we study the internal structure of the links within and between the asset and liability sides of 24 major European Union (EU) life insurers’ balance sheets over the 2007–2015 time horizon. We find strong and substantial evidence that life insurers’ assets and liabilities have become more independent over time. We argue that the declining trend of market interest rates has contributed to the generalized reduction in the linkage between the asset side and the liability side of EU life insurers, and has made insurance companies more exposed to ALM-related risks relative to the period before the financial crisis.
Insurance companies, asset-liability dependency, balance sheet, interest rates, canonical correlation
Financial intermediaries' asset-liability dependency and low-interest-rate environment: evidence from EU life insurers / Curcio, Domenico; Borri, Nicola; Cerrone, Rosaria; Cocozza, Rosa. - In: JOURNAL OF FINANCIAL MANAGEMENT, MARKETS AND INSTITUTIONS. - ISSN 2282-717X. - 7:1(2019), pp. 1-25. [10.1142/S2282717X19400036]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/184941
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