The Dynamic Impact of Macro Shocks on Insurance Premiums

Feng Guo; Hung Gay Fung; Yong Sophie Huang

doi:10.1007/s10693-009-0052-0

The Dynamic Impact of Macro Shocks on Insurance Premiums

Feng Guo, Hung Gay Fung, Yong Sophie Huang

University of Missouri-St. Louis

Research output: Contribution to journal › Article › peer-review

Abstract

We develop a model that investigates the relation between insurance premiums and macroeconomic variables, including oil price, interest rate, aggregate supply, and aggregate demand. We then use a multivariate structural vector error correction model to distinguish the effects arising from permanent and transitory components of insurance premiums. Changes in the transitory component indicate that our model captures key historical events. Although real shocks originating from oil price and aggregate supply explain the behavior of insurance premiums well, we show that financial market shocks are the main driving force behind the recent increasing volatility in insurance premiums in the U.S. market.

Original language	American English
Journal	Journal of Financial Services Research
Volume	35
DOIs	https://doi.org/10.1007/s10693-009-0052-0
State	Published - Feb 2009

Keywords

Insurance premiums
structural shocks
vector error correction model

Disciplines

Business

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title = "The Dynamic Impact of Macro Shocks on Insurance Premiums",

abstract = " We develop a model that investigates the relation between insurance premiums and macroeconomic variables, including oil price, interest rate, aggregate supply, and aggregate demand. We then use a multivariate structural vector error correction model to distinguish the effects arising from permanent and transitory components of insurance premiums. Changes in the transitory component indicate that our model captures key historical events. Although real shocks originating from oil price and aggregate supply explain the behavior of insurance premiums well, we show that financial market shocks are the main driving force behind the recent increasing volatility in insurance premiums in the U.S. market. ",

keywords = "Insurance premiums, structural shocks, vector error correction model",

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N2 - We develop a model that investigates the relation between insurance premiums and macroeconomic variables, including oil price, interest rate, aggregate supply, and aggregate demand. We then use a multivariate structural vector error correction model to distinguish the effects arising from permanent and transitory components of insurance premiums. Changes in the transitory component indicate that our model captures key historical events. Although real shocks originating from oil price and aggregate supply explain the behavior of insurance premiums well, we show that financial market shocks are the main driving force behind the recent increasing volatility in insurance premiums in the U.S. market.

AB - We develop a model that investigates the relation between insurance premiums and macroeconomic variables, including oil price, interest rate, aggregate supply, and aggregate demand. We then use a multivariate structural vector error correction model to distinguish the effects arising from permanent and transitory components of insurance premiums. Changes in the transitory component indicate that our model captures key historical events. Although real shocks originating from oil price and aggregate supply explain the behavior of insurance premiums well, we show that financial market shocks are the main driving force behind the recent increasing volatility in insurance premiums in the U.S. market.

KW - Insurance premiums

KW - structural shocks

KW - vector error correction model

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M3 - Article

VL - 35

JO - Journal of Financial Services Research

JF - Journal of Financial Services Research

ER -

The Dynamic Impact of Macro Shocks on Insurance Premiums

Abstract

Keywords

Disciplines

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