Optimal Capital Structure for Life Insurance Companies Offering Surplus Participation
Fuente:
arXiv
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| Hauptverfasser: | , |
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| Format: | Preprint |
| Veröffentlicht: |
2025
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| _version_ | 1866912862291623936 |
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| author | Fießinger, Felix Stadje, Mitja |
| author_facet | Fießinger, Felix Stadje, Mitja |
| contents | We adapt Leland's dynamic capital structure model to the context of an insurance company selling participating life insurance contracts explaining the existence of life insurance contracts which provide both a guaranteed payment and surplus participation to the policyholders. Our derivation of the optimal participation rate reveals its pronounced sensitivity to the contract duration and the associated tax rate. Moreover, the asset substitution effect, which describes the tendency of equity holders to increase the riskiness of a company's investment decisions, decreases when adding surplus participation. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2504_12851 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Optimal Capital Structure for Life Insurance Companies Offering Surplus Participation Fießinger, Felix Stadje, Mitja Mathematical Finance 90B50, 91B06, 91B50, 91G05, 91G10, 91G50 We adapt Leland's dynamic capital structure model to the context of an insurance company selling participating life insurance contracts explaining the existence of life insurance contracts which provide both a guaranteed payment and surplus participation to the policyholders. Our derivation of the optimal participation rate reveals its pronounced sensitivity to the contract duration and the associated tax rate. Moreover, the asset substitution effect, which describes the tendency of equity holders to increase the riskiness of a company's investment decisions, decreases when adding surplus participation. |
| title | Optimal Capital Structure for Life Insurance Companies Offering Surplus Participation |
| topic | Mathematical Finance 90B50, 91B06, 91B50, 91G05, 91G10, 91G50 |
| url | https://arxiv.org/abs/2504.12851 |