The Interplay between Insurers’ Financial and Asset Risks During the Crisis of 2007-2009
The Geneva Papers, Vol. 36, pp. 348–379, 2011
32 Pages Posted: 1 Aug 2011
Date Written: July 31, 2011
Abstract
In this study we compare the interplay between capital and asset risks before and during the 2007-2009 financial crisis for the US life and health insurance industries partitioned into segments by product specialization, size, and governance. The results show substantial intra-industry variation in the partial elasticity of capital with respect to asset risk, as well as significant impact of the crisis. Segment variation was driven by product focus. Most notable is the greater impact of the crisis on the US insurers specializing in annuities (least risky product) than on specialists in health lines (riskiest product). During the crisis, the elasticity between asset risk and capital declined for all segments indicating that insurers’ operation may have shifted from offsetting risk to seeking risk.
Keywords: health and life insurers, capital, risk, financial crisis
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
What Do We Know About Capital Structure? Some Evidence from International Data
By Raghuram G. Rajan and Luigi Zingales
-
The Theory and Practice of Corporate Finance: Evidence from the Field
By John R. Graham and Campbell R. Harvey
-
The Theory and Practice of Corporate Finance: The Data
By John R. Graham and Campbell R. Harvey
-
Market Timing and Capital Structure
By Malcolm P. Baker and Jeffrey Wurgler
-
Market Timing and Capital Structure
By Malcolm P. Baker and Jeffrey Wurgler
-
Testing Tradeoff and Pecking Order Predictions About Dividends and Debt
By Eugene F. Fama and Kenneth R. French
-
Testing Static Trade-Off Against Pecking Order Models of Capital Structure
-
Optimal Capital Structure Under Corporate and Personal Taxation
By Harry Deangelo and Ronald W. Masulis