THE NEXUS OF FINANCIAL CYCLES AND DEMAND FOR LIFE INSURANCE IN UKRAINE: DECOMPOSITION AND CROSS-CORRELATION ANALYSIS

Abstract

The article explores the complex relationship between macroeconomic fluctuations that form financial cycles and the dynamics of demand in the Ukrainian life insurance market. The study’s relevance is driven by profound transformational processes within the financial system, where life insurance serves simultaneously as a risk mitigation tool and a means of long-term capital accumulation. The research aims to verify the existence of a statistically significant link between key indicators of financial cycles (credit, monetary, currency, and asset price cycles) and the volume of accumulated insurance premiums. The study employs a systematic methodological approach based on time series decomposition – isolating trend, cyclical components using the Python programming language – as well as correlation and cross-correlation analysis with a lag shift of up to 3 years. The scientific novelty of the results lies in identifying the differentiated impact of various cycle components on insurance demand. Specifically, it was established that the trend components of currency and credit cycles have a steady positive impact on the life insurance market. The highest correlation (0.994) was recorded between long-term exchange rate changes and insurance premiums, indicating the use of insurance products as a tool to protect savings from devaluation processes. Trend shifts in private sector lending demonstrate a delayed positive effect, reaching a maximum at the third lag (0.615), which is associated with the intensification of mortgage and long-term lending accompanied by mandatory life insurance. At the same time, a significant inverse relationship was found between insurance demand and investment cycles (the correlation coefficient with the S&P Global Equity Indices is -0.943). This indicates a substitution effect: during periods of stock market growth, consumers reallocate capital toward higher-yielding assets, viewing insurance as a less attractive alternative. Monetary cycles also demonstrate a specific impact: an increase in the money supply (BM) stimulates demand (r = 0.637) due to rising public welfare, while an increase in the interest rate spread (IRS) has a negative impact (r = -0.657) as bank deposits become more attractive. Cyclical components are long-term, wave-like fluctuations around the trend that do not have a strictly fixed period and amplitude. The practical significance of the results lies in the possibility of using the identified lag dependencies to develop strategies for insurance companies to adapt to macro-financial instability and to form state policies for stimulating long-term savings during economic downturns.