Municipal bonds as an investment opportunity for life insurance companies on capital market in Macedonia

The capital market in the Republic of Macedonia is characterized as shallow and weak due to the small range of financial instruments for investment. This situation particularly affects the investment opportunities of life insurance companies because on one hand, they cannot achieve the desired diversification of investment portfolio and on the other hand, they are legally bound to the total amount of assets covering technical provisions to be adequately placed. The experiences of some countries in the region and beyond point out municipal bonds as a particularly attractive investment opportunity. This financial instrument would be appropriate for the life insurance companies in terms of their investment policy and for managing the risks that occur during the maturity mismatch between assets and liabilities. In the Republic of Macedonia conditions are created for the emergence of municipal bonds, both in terms of legislation and in existence of opportunity in some municipalities to borrow through the issuance of bonds. (C) 2012 published by Elsevier B.V. Selection and/or peer review under responsibility of the Faculty of Tourism and Hospitality