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Impact of Macroeconomic Variables on Initial Premiums in Variable Life Insurance with a Vector Error Correction Model

  • Journal of Insurance and Finance
  • 2010, 21(3), pp.3-32
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

황진태 1 Daigyo Seo 2

1보험연구원
2

Accredited

ABSTRACT

This paper analyzes how first premiums in variable annuities and universal products respond to shocks to macroeconomic variables as well as each of their own variables. Then it decomposes the variance of their forecast errors caused by shocks given exogenously to the variables. Our end results in the paper are that following a temporary positive response, the first premiums in both variable annuities and universal continue to respond negatively to a shock to the interest rate, the so-called Korea's 5-year government bond yield, whereas they show a permanent positive response to the Korea Composite Stock Price Index (KOSPI). In addition, it follows that the first premiums in variable annuities shows a positive response to a shock to the unemployment rate, while those in variable universal does a negative response. The variance of forecast errors in variable annuities is greatly caused by a shock to the KOSPI and the interest rate. In contrast, the variance of forecast errors in variable universal is largely led to by a shock to the unemployment rate.

Citation status

* References for papers published after 2022 are currently being built.

This paper was written with support from the National Research Foundation of Korea.