Five essays on current challenges for life insurance companies

Life insurance companies are one of the largest institutional investors. Therefore, alongside their operating business, the investment portfolio represents a key challenge for life insurers. This cumulative thesis thus deals with current challenges for life insurance companies related to their operating business and investment portfolio. When granting guaranteed payments, the financial risk poses a challenge for the life insurer’s operating business and investment portfolio. The first research paper deals with life reinsurance as a solution to the financial risk when assuming perfect and asymmetric information between the reinsurer and the insurer. Moreover, sustainable financing poses a further challenge for the investment portfolio. Different instruments are offered on the sustainable debt market including green bonds and sustainability-linked bonds (SLBs). Thus, the second, third and fourth research paper of this dissertation contribute to the literature related to SLBs. In particular, the incentive structure, the design and the effect on corporate default risk is analyzed. Lastly, (perceived) longevity and mortality risks are further challenges in the operating business of life insurers, especially when pricing mortality- or longevity-linked contracts or when analyzing policyholders’ behavior. As discussed in academic literature, biological and subjective age influence mortality rates, economic results and the demand for retirement products. Thus, research paper five proposes a model for biological and subjective age and introduces a care-dependence model such that biological and subjective age can be included as variables into economic problems.