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Insurance Companies in Emerging Markets

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  • Janet Kong
  • Manmohan Singh
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    Abstract

    This paper focuses on asset allocation decisions of life insurance companies in emerging markets. Mature market insurers allocate only a small fraction of their assets to emerging markets because of regulatory constraints, rating pressures, and currency risk. However, global insurers invest directly in emerging markets by setting up subsidiaries rather than through portfolio investment, and this trend is increasing. Local insurers largely remain captive investors of local instruments and provide stability to the domestic securities market. The regulatory regime and the liquidity and depth of local markets play an important role in asset allocation decisions of insurers. Insurance companies are increasingly adopting asset liability management and risk control measures. However, insufficiently developed local markets and regulatory interventions on the liabilities side often limit optimal asset allocation.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/88.

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    Length: 20
    Date of creation: 01 May 2005
    Date of revision:
    Handle: RePEc:imf:imfwpa:05/88

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    Related research

    Keywords: Emerging markets; Liquidity; insurance companies; life insurers; life insurance; risk management; insurance products; pension funds; pension; insurance industry; policyholders; investment risks; solvency requirements; insurance contracts; underwriting; guaranteed return; insurance regulations; investment risk; solvency requirement; credit risk; guaranteed returns; reinsurance; annuities markets; private pension funds; guaranteed rate; securities markets; insurance policies; life insurance companies; solvency margin; reinsurance companies; insurance product; defined contribution pension; life insurer; future obligations; investment choices; contribution pension; private pension; retirement; insurance industries; transition economies; guaranteed benefits; public pension; investment returns; provident fund; pension schemes; mutual fund; contribution pension scheme; market risks; insurance regulation; individual accounts; portfolio choice; pension scheme; investment guidelines; retirement saving;

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    References

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    1. G. A. Mackenzie, 2002. "The Role of Private Sector Annuities Markets in an Individual Accounts Reform of a Public Pension Plan," IMF Working Papers 02/161, International Monetary Fund.
    2. David F. Babbel & Anthony M. Santomero, 1997. "Risk Management by Insurers: An Analysis of the Process," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 96-16, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. Eric Briys & François de Varenne, 1996. "On the Risk of Life Insurance Liabilities: Debunking Some Common Pitfalls," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 96-29, Wharton School Center for Financial Institutions, University of Pennsylvania.
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    Cited by:
    1. Peter Haiss & Kjell Sümegi, 2008. "The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis," Empirica, Springer, Springer, vol. 35(4), pages 405-431, September.
    2. Teresa Bianchi & Gernot Ebner & Raimund Korherr & Eva Ubl, 2011. "The Austrian Insurance Industry in CESEE: Risks and Opportunities from a Financial Stability Point of View," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), Oesterreichische Nationalbank (Austrian Central Bank), issue 22, pages 88-106.

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