Investment Insurance Research Articles

Effective Forecasting of Insurer Capital Requirements: ARMA-GARCH, ARMA-GARCH-EVT, and DCC-GARCH Approaches

This research paper presents a comprehensive analysis of three prominent volatility and dependence models for financial time series: ARMA-GARCH, GARCH-EVT, and DCC-GARCH. These models are employed to assess and forecast capital requirements for life and non-life insurer investments. This study evaluates the models' performance in forecasting Value-at-Risk, using daily data on key Thai financial indicators (representing permissible insurer investment assets) from March 2009 to March 2024. Specifically, 1-day and 10-day VaR forecasts are generated using the ARMA-GARCH and DCC-GARCH models, while the ARMA-GARCH-EVT model is employed for 1-day VaR forecasting. Our findings indicate that the ARMA-GARCH model effectively captures time-varying volatility, while the GARCH-EVT approach enhances tail risk estimation, particularly relevant for stress testing. Additionally, the DCC-GARCH model allows for the examination of dynamic conditional correlations between assets, providing insights into portfolio diversification benefits. Rigorous backtesting procedures, employing Kupiec and Christoffersen tests with a rolling window of 1,000 out-of-sample observations, confirm that the majority of models accurately forecast VaR at their respective horizons, with only a very small subset of 10-day VaR models exhibiting limitations. These results highlight that ARMA-GARCH, ARMA-GARCH-EVT, and DCC-GARCH models offer insurers robust tools for estimating minimum capital requirements, forecasting investment risk, and guiding strategic asset allocation decisions. This research underscores the effectiveness of these models for practical application in the insurance industry while also emphasizing the importance of continued model validation, particularly for extended forecasting horizons. Doi: 10.28991/ESJ-2024-08-06-03 Full Text: PDF

Impact of geopolitical risk on corporate insurance investment

Impact of geopolitical risk on corporate insurance investment

Tax Saving Strategies And Financial Planning For Salaried Employees

This study explores tax-saving strategies and financial planning among salaried employees in India, finding moderate awareness of tax-saving options and a preference for investments in insurance, mutual funds, and post office schemes. The research highlights a need for improved financial literacy and advocates for educational reforms and government support to help employees manage taxes effectively and secure their financial future.

Protection of the rights of foreign investors during the state of war in Ukraine

The article is devoted to the study of the protection of the rights of foreign investors during the state of war in Ukraine. The author focuses on the fact that this topic is currently relevant due to the fact that the reconstruction of Ukraine will become necessary. The war caused the outflow of foreign investments from our country. In addition, corruption, pressure from the authorities, and unfair justice are the reasons why foreign investors leave Ukraine. Every investor aspires to work in a state where law and justice reign, so Ukraine, which aspires to membership in the European Union, should create just such a state. Therefore, its primary task is to create a favorable business climate for foreign investors to carry out their activities. Current Ukrainian legislation guarantees compensation and indemnification of losses to a foreign investor, guarantees are also provided in case of termination of investment activity; state guarantees for the protection of foreign investments are defined. In accordance with the Law of Ukraine «On State Support of Investment Projects with Significant Investments in Ukraine», the state provides support to large investment projects. In connection with the introduction of the state of war in Ukraine in 2024, the Law of Ukraine on the insurance of investments against war risks entered into force. The Cabinet of Ministers of Ukraine established a credit agency that provides investment insurance. Although the war made Ukraine unattractive to foreign investors, the authorities are taking all possible measures to improve the country’s investment climate. The author draws attention to the need to study and transpose the experience of successful countries in this regard. For example, Australia offers quite good conditions to foreign investors - consistent economic growth, highly qualified labor force, strategic location, efficient administration and judicial system, and good infrastructure. Mexico is also attractive to foreign investors, the «Invest in Mexico» business center has been created to assist investors. The war is an accelerant for positive changes in the state, and after its end, the reconstruction of Ukraine is an important task, therefore the efforts of all branches of government should be directed at overcoming all obstacles to the effective work of foreign investors in our state.

Investors Decision making Behaviour in Insurance Investment Preference

This study focuses on understanding investors’ decision-making behavior in the context of insurance investment avenues. It employs the Flinder’s Decision Making Questionnaire, based on the decisional conflict model proposed by Irving Janis and Leon Mann in 1979. The questionnaire comprises 31 items that assess six dimensions of decision-making behavior: Vigilance, Hyper Vigilance, Defensive Avoidance, Procrastination or Postponement, Buck-Passing, and Rationalization. This study examines how these six dimensions influence investors’ decisions regarding insurance investment preferences. The objective is to analyze the patterns of investors’ decision-making behavior and their impact on investment choices in the insurance sector.

A Study of the Implementation of PSAK 74 on Firm's Value of Insurance Companies in Indonesia

Firm’s value plays an important role for both company management and investors in investment decisions. Often, net profit or revenue is closely related to the creation of firm’s value. This research examines whether the application of the Pernyataan Standar Akuntansi Keuangan (PSAK) or Indonesian Financial Accounting Standards Board 74 affects company value as measured using Tobin’s Q. Standards for insurance company contracts have changed based on the adoption of IFRS 17, and are still being prepared and conducted in-depth studies. This research uses a quantitative approach with panel data regression testing using STATA. Data was collected in the form of secondary data on insurance companies listed on the Indonesia Stock Exchange from 2012 to 2022, using a purposive sampling method. The results of the research show that operational profit (loss) from the new face of insurance company financial reports has a positive effect, while insurance company investment profit (loss) has a negative effect on company value. This research expands the study of the implications of implementing PSAK 74 for insurance companies in the future.

Foreign investments of Japanese life insurance companies

We investigate Japanese life insurance companies’ investment returns or volatilities and their discretionary decisions on foreign portfolio investments. These decisions include the proportion of foreign investments in the companies’ proprietary investments and the currency risk hedge. We consider the “carry trade” scenario when the market favors investing in high-yield currencies by borrowing the Japanese yen. We establish three results. First, the currency hedge relates positively to the investment returns under the carry trade scenario but negatively otherwise. Second, the proportion of foreign investments relates positively to the investment returns. Third, the investment returns significantly decrease under the carry trade scenario.

The Optimal Portfolio of AIA Group Limiteds Investment Insurance Products Based on Markowitz Model and Index Model

This paper uses the Markowitz and Index models to look for the optimal portfolio of AIA Group Limiteds Investment Insurance Products. While most of the previous articles concerning these two models only studied theoretically, the research object of this paper is more practical and instructive. First, this papers study method is to collect ten AIA investment insurance products revenue data from 2018 to 2023 from its website. Then, process the data, such as calculating the mean, variance, etc. Markowitz and Index Model are built on the basis of these data. The constraints are then introduced to find the optimal portfolio under different conditions. After comparison, it concludes that the Index Model analyzes the risk, while the Markowitz Model portfolio has the potential to yield higher returns than the Index Model portfolio when both are subject to the same level of risk. This research is instructive for investors finding the most suitable portfolio with the highest return and AIA developing new portfolio insurance products.

A mean field game approach to optimal investment and risk control for competitive insurers

We consider an insurance market consisting of multiple competitive insurers with a mean field interaction via their terminal wealth under the exponential utility with relative performance. It is assumed that each insurer regulates her risk by controlling the number of policies. We respectively establish the constant Nash equilibrium (independent of time) on the investment and risk control strategy for the finite n-insurer game and the constant mean field equilibrium for the corresponding mean field game (MFG) problem (when the number of insurers tends to infinity). Furthermore, we examine the convergence relationship between the constant Nash equilibrium of finite n-insurer game and the mean field equilibrium of the corresponding MFG problem. Our numerical analysis reveals that, for a highly competitive insurance market consisting of many insurers, every insurer will invest more in risky assets and increase the total number of outstanding liabilities to maximize her exponential utility with relative performance.

Developing the Voluntary Pension Fund at Enterprises in Vietnam from the Perspective of Employers

The paper studies the factors affecting the development of the voluntary pension fund system at enterprises from the employers' perspective. Through a survey of 37 enterprises, the paper clarifies employers' awareness of the importance of voluntary pension funds, the need for enterprises' pension funds, and their willingness to invest in the voluntary retirement fund. The findings show that 78.83% of businessmen believe that developing a voluntary pension fund system is necessary because voluntary pension insurance is a way for employees to protect themselves and their families against risks. 100% of business owners want a voluntary pension fund based on an agreement between the enterprises and employees, while 60% of employers prefer the blended mechanism with government supervision and support. Regarding the level of investment in social insurance and other retirement regimes, 68% of enterprises spend less than 10% of total costs to implement the program; 30% of enterprises use from 10% to 20% of total costs to implement the program. Employers show their prudence when considering a voluntary pension fund at their enterprises. More than 60% of employers concern about the fund security, 24% considers the impact of macro economic factors on the fund performance.

Optimal mean-variance investment and reinsurance strategies with a general Lévy process risk model

This paper is concerned with the optimal time-consistent investment and reinsurance strategies for mean-variance insurers with a general Lévy Process model. Expressly, the insurers are allowed to purchase proportional reinsurance and invest in a financial market, where the surplus of the insurers is assumed to follow a Cramér–Lundberg model and the financial market consists of one risk-free asset and one risky asset whose price process is driven by a general Lévy process. Through the verification theorem, the closed-form expressions of the optimal strategies under the mean-variance criterion are derived by a complex partial integral differential Hamilton–Jacobi–Bellman equations. Finally, numerical simulations are provided to verify the effectiveness of the proposed optimal strategies and some economic interpretations are drawn.

Compulsory pension insurance investment policy in Georgia

An important factor of economic development in Georgia is the reform of mandatory pension insurance and its successful investment policy, which started in the country five years ago and is being successfully implemented to this day. Many countries were not able to implement the said reform voluntarily, and Georgia is no exception. The reform has already been able to maximize the number of participants in the pension scheme, create a significant pension assets and multi-billion dollar base of investment capital, and have yielded practical results, which are reflected in the number of beneficiaries, disbursed funds and investment returns. The investment policy reform of the mandatory pension system has a great social impact and is characterized by high public interest. But the challenge is that the implemented large-scale reform requires further deep analysis and the development of mechanisms for sustainable development, which is manifested by the risk management of pension insurance assets, investment policies and obtaining high returns on the pension assets of the participants of investment activities through diversified and financially safe, transparent and reliable investments, Considering the investment and liquidity objectives of the pension system and the reputational requirements for adherence to investment principles.

Insurance Sector: A Prerequisite to a Sustainable Economic Growth and Development in Nigeria

The main objective of the study is to examine the effect of Insurance sector on the economic growth and development in Nigeria. The specific objective was to determine the effect of insurance premium, insurance investment and insurance assets on the real gross domestic product and human development index. Ex-post facto research design was utilized in the study. This study sourced secondary data from the Central Bank of Nigeria (CBN) statistical bulletin and United Nations Development Programme, spanning a time frame of 11 years, covering the period of 2012 to 2022. The study’s data were analyzed using the Co integrating regression method . The test of hypotheses conducted with the regression estimates from Co integrating regression showed the following results: Insurance premium has a negative and insignificant effect on the real gross domestic product (p-value = 0.6489); Insurance investment has a negative and insignificant effect on the real gross domestic product (p-value = 0.8909); Insurance assets has a positive and insignificant effect on the real gross domestic product (p-value = 0.0931). Insurance premium has a negative and insignificant effect on HDI (p-value = 0.6622); Insurance investment has a negative and insignificant effect on human development index (p-value = 0.9780); Insurance assets has a positive and significant effect on human development index (p-value = 0.0093).The study recommends that authorities in the insurance sector should review their reform policies and adopt strategies to enhance premium mobilization functions in Nigeria. Additionally, the insurance industry appears to have potential within the Nigerian economy, suggesting that insurance companies should focus their investments on more productive sectors.

Optimal Investment and Reinsurance Policies for Loss-Averse Insurers

Optimal Investment and Reinsurance Policies for Loss-Averse Insurers

Influence of socio-economic factors on risk management strategies among generation Z in India pertaining to health: a post-pandemic analysis

This study aims to examine the factors influencing the adoption of health insurance and buy intention among Generation Z in India during the period after the COVID-19 pandemic. The COVID-19 pandemic has highlighted the significance of healthcare readiness and fiscal stability, hence emphasizing the crucial role of health insurance in the lives of individuals and households. Generation Z, encompassing individuals born approximately from the mid-1990s to the early 2010s, constitutes a noteworthy demographic cohort characterised by distinct inclinations and conduct. This study investigates the demographic features of individuals, their level of knowledge and awareness regarding health insurance, their attitudes towards risk, and the influence of the pandemic on their perceptions. Preliminary data suggest that the Gen Z population in India understands the significance of health insurance. However, some obstacles impede their adoption of such insurance, including a lack of comprehensive knowledge, budgetary limitations, and a tendency to prioritise immediate financial objectives. Moreover, the ongoing global pandemic has significantly impacted individuals’ perception of healthcare risks and financial planning, potentially affecting their inclination to allocate resources towards health insurance investments. This study enhances our comprehension of the changing patterns of health insurance adoption in India, specifically among the youngest cohort, and offers valuable insights for insurers, policymakers, and healthcare providers to customise their offerings and communication approaches in order to effectively address the requirements of Generation Z in the aftermath of the pandemic. In conclusion, promoting the adoption of health insurance among this particular cohort has the potential to enhance financial resilience and facilitate improved access to healthcare for future generations in India.

LEGAL ASPECTS OF INVESTMENT IN UKRAINE INSURANCE AGAINST WAR RISKS

The article is devoted to insurance as a tool to protect investments in wartime. In particular, attention is paid to the analysis of the draft law of Ukraine, which defines military risk as the main insurance risk in an investment insurance contract. The purpose of the publication is to show the actual situation of readiness of the legislative framework for the launch of a new type of insurance, namely insurance of investments against military risks. Keywords: investments, investment insurance, systemic risks, military risks, legal system.

Damage assessment and relocation as tools for preserving business during martial law

The article is devoted to studying the problems of damage assessment and business relocation under martial law in Ukraine. The article uses literature and document analysis methods, including a review of recent studies on damage assessment and business relocation and an analysis of relevant legal acts and international standards. The authors examine the legal framework governing the process of assessing the damage caused by armed aggression and the mechanisms for compensating it.The methodological aspects of evaluation, including standardised and independent approaches, are analysed, emphasising the importance of adherence to national and international standards. The main stages of the valuation process are described: preparation, actual valuation, and report. Particular attention is paid to the problems of accounting for changes in the value of money over time and regional differences in economic conditions. The article examines the role of international organisations and standards in ensuring transparency and reliability of damage assessment. The importance of establishing the International Register of Losses in The Hague as an important tool fordocumenting losses and ensuring accountability for armed aggression is emphasised. Particular attention is paid to the issues of business risk insurance in wartime and investment insurance against war risks. The role of such organisations as the Multilateral Investment Guarantee Agency in supporting the investment climate in Ukraine is analysed. The importance of effective damage assessment and business relocation as key tools for maintaining economic stability, minimising losses and preserving the potential for future recovery and development of Ukraine under martial law isemphasised. The need to further improve the methodology for assessing losses and compensation mechanisms to ensure fair compensation and increase confidence in the country's economic recovery process is highlighted.

Life reinsurance under perfect and asymmetric information

This paper studies life reinsurance as a solution to default risk in equity-linked life insurance products with surplus participation. The problem is considered under both perfect and asymmetric information about the insurer's risk profile between the reinsurer and the insurer. In both cases, we analyze the existence of proportional reinsurance and the impact of the insurer's investment strategies on optimal reinsurance. We find that the more risky the insurer's investment portfolio is, the more risk the insurer tends to transfer to the reinsurer. Further, information asymmetry leads to additional information costs and consequently to a larger reinsurance premium and a lower reinsurance share.

Environment Risks and Their Responses to Chinese Companies Investing in Countries along the Belt and Road: Solutions Based on the International Investment Law

In recent years, Chinas investment in countries along the Belt and Road has gradually expanded. Minerals, energy, manufacturing, infrastructure, engineering construction, etc. are key industries for Chinese companies to invest in countries along the road. Legal deficiencies in the host countrys environment, behavioral defects of overseas investment companies, and the lack of regulatory norms and weak supervision of environment risks in China increase the potential environmental liability risk of Chinese companies. On the purpose of reducing the occurrence of environment risks, this paper takes the international investment law as the entry point, adopts the literature review method and data induction method, and combines a large number of environment risk treatment cases of Chinese companies in the project investment, and proposes five solutions: include environmental protection clauses when signing international treaties with host countries; Strengthen companies environmental responsibilities and environmental disclosure obligations; Special legislation for overseas investment by companies; Fully use the role of overseas investment insurance and establishing a diversified mechanism for resolving international environmental disputes.

Agricultural insurance and rural revitalization-an empirical analysis based on China's provincial panel data.

Agricultural insurance is a kind of compensation insurance designed to provide protection for the economic losses caused by insured accidents suffered by agricultural producers in agricultural production. Rural revitalization refers to the strategy of improving the level of rural economic, social and cultural development and achieving coordinated and sustainable development of urban and rural development. Agricultural insurance can effectively diversify risks and reduce losses for agricultural producers, which plays an important role in stabilizing farmers' income, helping rural economic development, and promoting rural revitalization. Based on the theoretical analysis of the mechanism of agricultural insurance on rural revitalization, this paper empirically studies the effect of agricultural insurance on rural revitalization by using panel data from various provinces in China from 2011 to 2020. In this paper, the TOPSIS entropy weight method, the system generalized method of moments (GMM) and the threshold model are used to calculate the actual development level of rural revitalization in each province of China, the promotion effect of agricultural insurance on the development level of rural revitalization and the promotion of rural revitalization in five dimensions, and whether there is a threshold effect of agricultural insurance on rural revitalization. The empirical results show that: (1) The level of rural revitalization in various provinces in China shows a dynamic trend of "overall slow rise, with obvious differences between provinces." (2) Improving the development level of agricultural insurance can drive the improvement of China's rural revitalization level, and every 1 unit increase in the development level of agricultural insurance will drive the level of China's rural revitalization to increase by 0.1633 units. At the same time, the role of agricultural insurance on social etiquette and civility is not significant, and the role of the remaining four rural revitalization goals is significant. (3) Agricultural insurance has a significant effect on the level of rural revitalization in eastern provinces, but does not play a significant role in rural revitalization in central and western provinces. (4) The role of agricultural insurance on rural revitalization has a double threshold effect. Accordingly, this paper puts forward some suggestions for increasing the capital investment in agricultural insurance, innovating the new mode of agricultural insurance operation, promoting the in-depth development of agricultural insurance according to local conditions, and reasonably adjusting the capital investment of agricultural insurance. Finally, because the data used in this paper do not cover the entire process of rural revitalization and the research is mainly carried out from a macro perspective, there are still some shortcomings in this paper.