COVID-19, insurer board utility, and capital regulation

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Title:	COVID-19, insurer board utility, and capital regulation
Authors:	Li, Xuelian;Lin, Panpan;Lin, Jyh-Horng
Keywords:	Optimal guaranteed rate;Board utility;COVID-19;Capital regulation
Date:	2020-10
Issue Date:	2020-12-08 12:10:15 (UTC+8)
Publisher:	Finance Research Letters
Abstract:	This paper develops a down-and-out call option model by introducing a structural break in volatility to capture the coronavirus (COVID-19) outbreak. The life insurer's equity and its board’s utility are evaluated at the optimal guaranteed rate in the equity maximization. Results suggest that the seriousness degree of the COVID-19 outbreak and capital regulation enhance the optimal guaranteed rate and the board's utility. Increased the board's utility by increasing liabilities costs insurer profitability. Conflicts of incentives can arise during the COVID-19 outbreak.
Relation:	Finance Research Letters 36, 101659
DOI:	10.1016/j.frl.2020.101659
Appears in Collections:	[Graduate Institute & Department of International Business] Journal Article

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