Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/312465 
Authors: 
Year of Publication: 
2023
Citation: 
[Journal:] European Actuarial Journal [ISSN:] 2190-9741 [Volume:] 14 [Issue:] 2 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2023 [Pages:] 525-550
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
COVID-19 has affected mortality rates and financial markets worldwide. Against this background, we perform a COVID-19 stress test for life insurance, considering a joint financial and mortality shock, to evaluate the effectiveness of different risk mitigation strategies. Specifically, we conduct a model-based simulation analysis of a life insurer selling annuities and term life insurances. The analysis includes stress scenarios that are calibrated to observations during the first year of the COVID-19 pandemic. We also consider new business and study the risk situation under three different risk mitigation strategies observed in practice as an immediate response to the pandemic: stopping sales, increasing premiums, or adjusting investment strategies. Results show that a life insurer's risk situation is mainly affected in the short term, selling annuities (in addition to term life insurance) immunizes against the mortality shock, and the immediate use of risk mitigation strategies can help reduce the negative impact.
Subjects: 
Life insurance
Stress test
COVID-19
Risk mitigation strategies
Asset–liability model
JEL: 
G22
G23
G32
J11
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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