Abstract

This paper examines the impact of monetary policy on the profitability of French life insurance companies over the low interest rate environment. Using novel micro-data covering 31 individual life insurers operating in France over the 2009-2018 period, our empirical analysis suggests that the low-for-long interest rate environment has had an ambiguous effect on the profitability of French life insurers. However, when considering the heterogeneity of the sample based on legal categories --bancassurance, traditional S.A insurers and mutual insurers--, we find a significant impact for non bancassurance actors, robust to two monetary policy measures: the spread between long and short rates and the EU shadow rate from Wu and Xia (2016). The empirical analysis takes into account a range of individual features in order to further assess the channels at play. The article highlights the competitive advantage of bancassurance players that have benefited from the low-yield environment to gain market share throughout lower guaranteed rates and lower capital adequacy. Finally, the article offers some policy recommendations for regulators to mitigate financial instability associated with financial conglomerates and to improve risk-weighted incentives.

Abstract

This paper investigates how unexpected changes in US monetary policy influence global dynamics, with a particular focus on the remittance channel. We analyze monthly data from 13 major remittance-sending countries and 41 recipient countries, utilizing the local projections method developed by Jordà (2005). Our results reveal that an unexpected tightening of US monetary policy not only slows down the US economy but also exerts significant adverse effects on major remittance-sending countries. Consequently, remittance outflows decrease, affecting the economies of recipient countries. The magnitude of these effects varies depending on the recipient economies' reliance on remittance inflows. Specifically, countries for which remittance inflows constitute between 1 to 4 percent of their GDP tend to experience augmented inflows, thereby enhancing their resilience against the global economic repercussions triggered by US monetary policy tightening. Conversely, countries with remittance inflows surpassing 4 percent of their GDP witness diminished inflows and more pronounced recessionary effects