Grant detail

The Impact of Low Interest Rate Environment on the European Insurance Sector

Principal investigator: Mgr. Diana Žigraiová
Collaborators:
Description: The low yield environment currently poses the most prominent risk to the European insurance sector. Especially cashflow, reinvestment and valuation risks of insurance companies are exacerbated, potentially leading to increased risk of insolvency. At present, the interest rate for long-term contracts set to 4.2% does not reflect current economic conditions accurately despite its importance for insurance sector and its use in present valuation of liabilities of insurance companies. Therefore, we aim to model the long-term rate (UFR) using several stochastic processes and extrapolation approaches. Next, we propose to construct an evaluation tool in the form of utility function to compare the calculated series to actual historical long-term rates. We also intend to model the impact of the constructed UFRs on a hypothetical representative portfolio of European insurance companies in terms of solvency. Finally, we aim to investigate the impact of interest rate and other macroeconomic determinants on solvency of European insurance companies.

Application in November 2015
Participation:
Work in grant:
Web link:
Finance:
End date: 2017
Publications:

Updating the Long Term Rate in Time: A Possible Approach

Updating the Ultimate Forward Rate over Time: A Possible Approach

Conferences:

2017 Slovak Economic Association Meeting (SEAM)

CEQURA Conference 2017

August 2022
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Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance
Česká Spořitelna
EY