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Multiple shadow insurance activities and life insurance policyholder protection

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  • Chen, Shi
  • Yao, Wenyu
  • Huang, Fu-Wei

Abstract

This paper develops a contingent claim model to evaluate the equity and liabilities of a life insurer who operates multiple shadow insurance activities specified as wealth management products and entrusted loans. We show that multiple shadow insurance operations by the insurer produce superior return performance and help policyholder protection. Increasing the guaranteed rate at an increased optimal margin contributes to insurance stability whereas increasing the participation rate at a decreased optimal margin adversely affects insurance stability.

Suggested Citation

  • Chen, Shi & Yao, Wenyu & Huang, Fu-Wei, 2021. "Multiple shadow insurance activities and life insurance policyholder protection," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319313868
    DOI: 10.1016/j.frl.2020.101524
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    References listed on IDEAS

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    More about this item

    Keywords

    Insurer interest margin; Shadow insurance; Barrier option;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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