Does Distribution Growth Aff ect the Insurer´s Asset Allocation in Life Insurance? The Case of Central Europe
Does Distribution Growth Aff ect the Insurer´s Asset Allocation in Life Insurance? The Case of Central Europe

Summary/Abstract: This paper deals with the effects of distribution stress and macroeconomic factorson the composition of life insurance investment portfolios on the Central European market.Using a wide array of variables and the VAR model as our main method, we have foundthat a strong majority of insurers react to external shocks, induced by high levels of contractturnover or positive changes in macro-variables such as GDP and inflation, by strengtheningbond components of their portfolio. The exception is connected to interest rates (two-weekrepo), which presumably have a negative effect on bond investments. Other components suchas shares, funds and cash positions have been affected in a diverse way, yet to a minor extent.This implies that insurers tend to react to external stressors by beefing up the conservativepart of their investments, potentially leading to an underperformance of managed assets.As such, our results point to conceivable regulatory implications, which would prevent thosesecondary negative detriments of life distribution growth (i.e., reselling), which are to beexpected on the surveyed market.

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