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What Motivates Insurers to Use Derivatives: Evidence from the United Kingdom Life Insurance Industry

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  • Yung-Ming Shiu

    (Department of Risk Management and Insurance, National Chengchi University, Taiwan)

Abstract

Using firm-specific variables that proxy for the motivations of life insurers’ decision to participate in derivative transactions, we examine existing theories of corporate hedging behaviour. Our findings support the evidence of previous research that risk management and scale factors explain the use of derivatives. We observe a substitution effect that insurers use on-balance-sheet hedging through structuring their assets and liabilities to reduce price risks.

Suggested Citation

  • Yung-Ming Shiu, 2011. "What Motivates Insurers to Use Derivatives: Evidence from the United Kingdom Life Insurance Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 36(2), pages 186-196, April.
    • Handle: RePEc:pal:gpprii:v:36:y:2011:i:2:p:186-196
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    Cited by:

    1. Shiu, Yung-Ming, 2020. "How does reinsurance and derivatives usage affect financial performance? Evidence from the UK non-life insurance industry," Economic Modelling, Elsevier, vol. 88(C), pages 376-385.

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