How Do Life Insurers Respond to a Prolonged Low Interest Rate Environment? A Literature Review
Issued Date
2022-08-01
Resource Type
eISSN
22279091
Scopus ID
2-s2.0-85136711843
Journal Title
Risks
Volume
10
Issue
8
Rights Holder(s)
SCOPUS
Bibliographic Citation
Risks Vol.10 No.8 (2022)
Suggested Citation
Suwanmalai W., Zaby S. How Do Life Insurers Respond to a Prolonged Low Interest Rate Environment? A Literature Review. Risks Vol.10 No.8 (2022). doi:10.3390/risks10080155 Retrieved from: https://repository.li.mahidol.ac.th/handle/123456789/83964
Title
How Do Life Insurers Respond to a Prolonged Low Interest Rate Environment? A Literature Review
Author(s)
Author's Affiliation
Other Contributor(s)
Abstract
Life insurers, whose contractual liabilities include providing minimum guaranteed interest rates to policyholders, are significantly affected by persistently low interest rates. Hence, this study reviews the literature on the prolonged low interest rate environment and its impact on the life insurance industry, incorporating multiple perspectives and practices in different countries. The effect of low interest rates on life insurance products depends on the sensitivity of the interest rate of each product type and the level of minimum interest rate guarantee. In addition, their impacts on the valuation of life insurance companies depend on shifts in the valuation interest rate, which is used to discount the present value of future benefits, as well as the financial and solvency issues faced by insurers. Overall, the literature suggests that insurers need both short- and long-term solutions to respond to a prolonged low interest rate environment.