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Do global uncertainties impede insurance activity? An empirical evidence from top two economies

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Listed:
  • Ahmed, Danish
  • Xuhua, Hu
  • Goldstein, Michael A.
  • Xie, Yuantao

Abstract

Insurance companies have long-dated assets and liabilities, so their balance sheets are very sensitive to large changes in risk. Using global investor confidence, oil price uncertainty, world pandemic uncertainty and world uncertainty as proxies for global uncertainties, we examine the influence of global uncertainties on insurance activities in China and US to explain their interdependence and causality from 1992 to 2022. Running continuous wavelet transforms and wavelet coherence analysis, we found that while life and non-life insurance activity in Chinese and American market lags investor confidence and pandemic uncertainty, only non-life insurance activity in the US leads world uncertainty. Since the relation does not hold for their Chinese counterpart, this is not a global effect. Furthermore, the nexus between Chinese and American life insurance activity and oil price uncertainty is insignificant. We conclude that insurance activities in China and US adhere to demand-following hypothesis.

Suggested Citation

  • Ahmed, Danish & Xuhua, Hu & Goldstein, Michael A. & Xie, Yuantao, 2024. "Do global uncertainties impede insurance activity? An empirical evidence from top two economies," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007657
    DOI: 10.1016/j.frl.2024.105735
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    More about this item

    Keywords

    Insurance activity; Investor confidence; Oil price; Pandemic; Uncertainty; Volatility;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L8 - Industrial Organization - - Industry Studies: Services

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