This study explores the determinants of an insurer’s guaranteed rate based on a
contingent claim model. According to the model development, we structure
and estimate the guaranteed rate setting and policyholder protection equations.
A time-series approach explains the guaranteed rate-setting behavior and
insurance stability captured by policyholder protection from 1990 to 2018. The
evidence suggests that derivatives, life insurance premiums, administrative
costs, and federal income tax affect the insurer’s guaranteed rate-setting
behavior. Increasing life insurance premiums and administrative costs in assetliability
matching management significantly enhance policyholder protection,
contributing to insurance stability.
