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Risk Affection and Transmission of News of Conditional Volatility from the Non-Life to Life Insurance Sector

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  • Apostolos Kiohos

Abstract

Non- Life and Life Insurance companies are the main expedients of risk transfer and risk management procedure in the economy and the society. This paper examines, in eight worldwide advanced insurance markets, whether there are transmissions of news of conditional volatility from the non-life to life insurance sector. The reason is that, regularly, non-life insurance risks have higher volatility and they are less predictable than life insurance risks. A GJR - GARCH model is used to test these relationships for the period January 1st 1990 to June 28th 2019 using daily trading observations for each listed insurance index. The results suggest that the French and the Australian non-life insurance sectors influence their life insurance sectors to a greater extent than the other countries insurance indices under study. There is also evidence that the leverage effect indicates that bad news concerning the non-life insurance index shows a more intense impact on the volatility of the life insurance index than the good news in the majority of the countries under study. However, bad and good news are symmetrical in French and Australian insurance markets.

Suggested Citation

  • Apostolos Kiohos, 2020. "Risk Affection and Transmission of News of Conditional Volatility from the Non-Life to Life Insurance Sector," Bulletin of Applied Economics, Risk Market Journals, vol. 7(2), pages 77-86.
    • Handle: RePEc:rmk:rmkbae:v:7:y:2020:i:2:p:77-86
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    References listed on IDEAS

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    More about this item

    Keywords

    Insurance risks; Volatility; Non- Life Insurance; Life Insurance; GJR GARCH;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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