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Liability Management and Solvency of Life Insurers in a Low-Interest Rate Environment: Evidence from Thailand

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  • Wilaiporn Suwanmalai

    (College of Management, Mahidol University, Bangkok 10400, Thailand)

  • Simon Zaby

    (College of Management, Mahidol University, Bangkok 10400, Thailand)

Abstract

This research investigates the liability management of Thai life insurers in a prolonged low-interest rate environment. It examines the impact of interest rate changes on life insurance products, solvency, and profitability. The study identifies a significant shift in product portfolios toward non-interest-sensitive products, which helps mitigate financial risk and enhance solvency. The solvency of Thai life insurers is influenced by their return on assets, with higher risk exposures requiring more capital, potentially lowering solvency levels. However, the proportion of risky investment assets is not significantly related to the solvency position in the Thai market. The market index return is a significant predictor of stock returns for Thai life insurers, while changes in interest rate sensitivity are not statistically significant between low-rate and normal periods. The average solvency level under Thailand’s regulatory regime is also not statistically different between normal and prolonged low-interest rate situations. This study contributes to the understanding of liability management practices among life insurers in Thailand and provides insights into the challenges and strategies for maintaining solvency and profitability in a low-interest rate environment.

Suggested Citation

  • Wilaiporn Suwanmalai & Simon Zaby, 2025. "Liability Management and Solvency of Life Insurers in a Low-Interest Rate Environment: Evidence from Thailand," JRFM, MDPI, vol. 18(7), pages 1-16, July.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:7:p:397-:d:1705090
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    References listed on IDEAS

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    1. Karsten Paetzmann, 2011. "Discontinued German life insurance portfolios: rules‐in‐use, interest rate risk, and Solvency II," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 19(2), pages 117-138, May.
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    4. Karsten Paetzmann, 2011. "Discontinued German life insurance portfolios: rules‐in‐use, interest rate risk, and Solvency II," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 19(2), pages 117-138, May.
    5. Jerry Hausman, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
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    7. William Greene & Dan Segal, 2004. "Profitability and Efficiency in the U.S. Life Insurance Industry," Journal of Productivity Analysis, Springer, vol. 21(3), pages 229-247, May.
    8. Wilaiporn Suwanmalai & Simon Zaby, 2022. "How Do Life Insurers Respond to a Prolonged Low Interest Rate Environment? A Literature Review," Risks, MDPI, vol. 10(8), pages 1-16, August.
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