IAI Actuarial Core Principles · Business Economics · Supply-side policies and their impact on businesses
Which of the following supply-side measures is most likely to benefit a life insurance company directly by lowering its operating or capital costs?
Deregulation that deepens the corporate bond market and eases entry helps insurers by giving them more long-term assets to match liabilities and by improving efficiency through competition. The other options raise costs or weaken saving incentives.
- AA rise in the minimum wage across all sectors
- BDeregulation of financial markets that deepens the domestic corporate bond market and eases entry of new intermediariesCorrect
- CAn increase in the rate of income tax on savings
- DA tariff on imported computer hardware
- A higher reserve requirement imposed on all banks
Explanation
A deeper corporate bond market gives insurers more long-dated assets to match liabilities, and market-friendly reform raises competition and efficiency. The other options raise costs, reduce saving incentives or restrict inputs.
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