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Evaluating the impact of stochastic interest rates and COVID-19 on financial performance under IFRS 17

Author

Listed:
  • Çiğdem LAZOĞLU

    (Graduate School of Science and Engineering, Hacettepe University, Ankara)

  • Uğur KARABEY

    (Department of Actuarial Sciences, Hacettepe University)

Abstract

The emergence of COVID-19 has resulted in a notable rise in mortality rates, consequently affecting various sectors, including the insurance industry. This paper analyzes the reflections of a sudden increase in mortality rates on the financial performance of a survival benefit scenario under the International Financial Reporting Standard 17. For this purpose, we thoroughly examined a single insurance scenario under four different states by modifying the interest and jump elements. We use Poisson-log bilinear Lee–Carter and Vasicek models for mortality and stochastic interest rate, respectively. Integrating the mortality model with a jump model that incorporates COVID-19 deaths we constructed a temporary mortality jump model. As a result, the temporary mortality jump model reflects the effects of the pandemic more realistically. We observe that even in this case mortality has a minor impact, whereas interest rates significantly still affect the financial position and performance of insurance companies.

Suggested Citation

  • Çiğdem LAZOĞLU & Uğur KARABEY, 2026. "Evaluating the impact of stochastic interest rates and COVID-19 on financial performance under IFRS 17," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 92(2), pages 277-296, June.
    • Handle: RePEc:ctl:louvde:v:92:y:2026:i:2:p:277-296
    DOI: 10.1017/dem.2024.25
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    Keywords

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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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