The Bulgarian Life Insurance Sector: Review and Analysis of Investments

Abstract

The aim of the study is to review and analyze the investment portfolios of life insurance companies in Bulgaria in view of the new regulatory requirements, actual business model trends, and current financial market environment. Investments are an integral part of the life insurance business model. In the study, Bulgarian life insurance sector is examined—regulations on investments, investment policy, and type of investments. Along with this, the accounting approach, accounting treatment, applicable accounting standards, and specific characteristics of all the financial instruments included in the portfolios of Bulgarian life insurance are examined. Last but not least, the paper also investigates whether asset allocation trends for Bulgarian life insurance companies are similar to the trends for European insurance sector.Data for life insurance companies’ investments are obtained from publicly available sources and include five-year period 2014–2018. Respective literature related to life insurance, financial instruments, investments, and accounting standards is reviewed. It is worth mentioning that life insurers are among the largest institutional investors in Bulgaria. Findings show that there have been new specific trends for Bulgarian life insurance companies, in terms of their investment portfolios, list of involved financial instruments throughout recent years. General conclusion is that investments of life insurance companies are changing and rebalancing is experienced with major factors strict regulatory investment limits, low yield environment, change of business model, and conservative risk management approach.KeywordsLife InsuranceFinancial StatementsInvestmentsAccountingBulgaria