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政大典藏 > College of Commerce > Department of Risk Management and Insurance > Periodical Articles > Item 140.119/135859

Please use this identifier to cite or link to this item: https://nccur.lib.nccu.edu.tw/handle/140.119/135859

Title:	Currency Uncertainty, Interest Guarantee, and Risk-Based Premiums in Life Insurance Guaranty Schemes
Authors:	張士傑 Chang , Shih-Chieh Bill Lee, Yen-Kuan
Contributors:	風管系
Keywords:	exchange rate risk; insurance guaranty fund; early closure; capital forbearance; grace period
Date:	2020-06
Issue Date:	2021-06-25 09:45:13 (UTC+8)
Abstract:	This paper investigates risk-based premiums in ex-ante insurance guaranty schemes. Exchange rate risk is incorporated into the asset portfolio to reflect the growing practice of life insurers taking offshore risks for yield enhancement. The closed-form solutions of the risk-based premium charged by the insurance guaranty fund are derived. Our premium rating includes currency mismatches between assets and liabilities, and the effects of early closure, capital forbearance, and grace periods are fully explored. First, we discover that the insurance guaranty fund premium is underestimated if currency fluctuation uncertainty is overlooked. Second, the premium is higher under regulatory forbearance than it is under the Merton stock put option, which implies that the cost is substantial. Finally, we note that the premium increases with higher financial leverage and greater foreign exposure in the asset portfolio. The results of our analysis provide further insight for regulators to implement regulatory policies and insurance guaranty schemes.
Relation:	Asia-Pacific Journal of Risk and Insurance, Vol.14, No.2, pp.1-30
Data Type:	article
DOI link:	https://doi.org/10.1515/apjri-2019-0035
DOI:	10.1515/apjri-2019-0035
Appears in Collections:	[Department of Risk Management and Insurance] Periodical Articles

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