The impact of low interest rates on the insurance companies’ portfolio composition in EU countries

Stevan Luković; Miloš Pjanić; Božidar Čakajac; Mirela Mitrašević

doi:10.5937/AnEkSub2300015L

Stevan Luković Faculty of Economics, University of Kragujevac, Kragujevac, Republic of Serbia
Miloš Pjanić Faculty of Economics in Subotica, University of Novi Sad, Subotica, Republic of Serbia
Božidar Čakajac Faculty of Economics, University of Kragujevac, Kragujevac, Republic of Serbia
Mirela Mitrašević Faculty of Business Economics Bijeljina, University of East Sarajevo, Bijeljina, Bosnia and Herzegovina

DOI: https://doi.org/10.5937/AnEkSub2300015L

Keywords: insurance companies, portfolio composition, low interest rates, fixed-income assets, equity

Abstract

The paper deals with the impact of low interest rate environment on the insurance companies’ portfolio composition in EU countries. The aim of the research is to show that continuously low interest rates could influence insurance companies to become more exposed to risky asset classes, but there is also possibility that insurance companies remain mainly exposed to fixed income assets. The secondary data analysis is carried out to further examine the potential portfolio dynamics in Q4 2017-Q4 2021 period. The results of the analysis show that in most EU countries insurance companies remain invested in fixed-income assets. However, in eight countries (mostly Nordic countries) insurance companies have become significantly more exposed to equity and equity mutual funds, which suggests that portfolio reshaping has taken place in these countries.