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The Impact of the Monetary Policy Interventions on the Insurance Industry

Author

Listed:
  • Loriana Pelizzon
  • Matteo Sottocornola

    (EIOPA)

Abstract

This paper investigates the effect of the conventional and unconventional (e.g. Quantitative Easing) monetary policy intervention on the insurance industry. We first analyse the impact on the stock performances of 166 (re)insurers of the last Quantitative Easing programme launched by the ECB by constructing an event study around the announcement date. Then we enlarge the scope by looking at the monetary policy surprise effects on the same sample of (re)insurers over a timeframe of 8 years. Our evidences suggest that a single intervention extrapolated from the comprehensive strategy cannot be utilized to estimate the effect of the monetary policy intervention on the market. On the impact of monetary policies we show how the effect of interventions changes over time. The expansionary monetary policy interventions, when generating an instantaneous reduction of interest rates, had an immediate positive effect on the stock market and on the insurance industry from 2008 till 2013. However, the effect fades away in 2014-2015. This period includes the last ECB QE intervention and it is characterized by already extreme low interest rates shows statistically non-significant effects on the (re)insurers stock returns.

Suggested Citation

  • Loriana Pelizzon & Matteo Sottocornola, 2016. "The Impact of the Monetary Policy Interventions on the Insurance Industry," EIOPA Financial Stability Report - Thematic Articles 8, EIOPA, Risks and Financial Stability Department.
  • Handle: RePEc:eio:thafsr:8
    as

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    File URL: https://eiopa.europa.eu/Publications/Reports/The%20Impact%20of%20the%20Monetary%20Policy%20Interventions%20on%20the%20Insurance%20Industry.pdf
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    References listed on IDEAS

    as
    1. Gatzert, Nadine, 2008. "Asset management and surplus distribution strategies in life insurance: An examination with respect to risk pricing and risk measurement," Insurance: Mathematics and Economics, Elsevier, vol. 42(2), pages 839-849, April.
    2. Jan H Holsboer, 2000. "The Impact of Low Interest Rates on Insurers," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(1), pages 38-58, January.
    3. Grosen, Anders & Lochte Jorgensen, Peter, 2000. "Fair valuation of life insurance liabilities: The impact of interest rate guarantees, surrender options, and bonus policies," Insurance: Mathematics and Economics, Elsevier, vol. 26(1), pages 37-57, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Insurance; monetary policy; financial stability;

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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