Leonard De Haan, Ph.D., Economics and Research Division, De Nederlandsche Bank, P.O. Box 98, Amsterdam, 1000 AB, Netherlands and Jan I. Kakes, Ph.D., Financial Stability Division, De Nederlandsche Bank, P.O. Box 98, Amsterdam, 1000 AB, Netherlands.
We investigate investment behaviour of 93 Dutch insurance companies, using a panel dataset of quarterly observations over the period 1999-2005. Our dataset is unique in that it not only contains balance sheet data and income statements, but also trade variables that measure purchases and sales of securities adjusted for revaluations. This enables us to distinguish real transaction volumes from revaluations of assets. We link insurers’ investment decisions to several firm-specific characteristics, among which line of business (life versus non-life insurance), financial structure (solvency), size, etc. Our preliminary results indicate that in virtual all quarters, life insurers tend to be net buyers of the main investment instruments (equity, bonds), whereas non-life institutions are often net sellers. Among life insurers, those with relatively many unit-linked products are among the constant buyers, indicating that unit linked life insurance brings some degree of automatism in the buying strategies of such insurers. We further find that insurers in general tend to follow negative feedback strategies, aimed at maintaining a fixed asset mix in market values. However, bigger, more solvent, less risky and more profitable insurers tend to rebalance their portfolio less stringent than the average firm.