The Determinants of the Foreign Exchange Exposure in the Life Insurance Companies in Egypt: An Applied Study

Abstract

Exchange rate fluctuations generate high risk for the insurance companies in Egypt, such as bankruptcy and liquidity. This study aims to measure the foreign exchange exposure (FXE) for the life insurance companies in Egypt during the period from 2000-2016. After that, the study measures the determinants of this exposure. The problem of the study is concerned with the fluctuations of the foreign exchange rate in Egypt, which have a great effect on the financial performance. Following prior studies (e.g. Lee, 2011 and Ampomah 2012), this study uses Jorian model to measure the FXE. The results of the study show that the life insurance companies in Egypt were significant to the FXE; the results are robust to the choice of model design.