The Fragility of Market Risk Insurance

Ralph Koijen and Motohiro Yogo

No 12560, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Insurers sell retail financial products called variable annuities that package mu- tual funds with minimum return guarantees over long horizons. Variable annuities accounted for $1.5 trillion or 34 percent of U.S. life insurer liabilities in 2015. Sales fell and fees increased after the 2008 financial crisis as the higher valuation of existing liabilities stressed risk-based capital. Insurers also made guarantees less generous or stopped offering guarantees entirely to reduce risk exposure. We develop an equilib- rium model of insurance markets in which financial frictions and market power are important determinants of pricing, contract characteristics, and the degree of market incompleteness.

JEL-codes: G22 G32 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-ias and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://cepr.org/publications/DP12560 (application/pdf)

Related works:
Journal Article: The Fragility of Market Risk Insurance (2022)
Working Paper: The Fragility of Market Risk Insurance (2022)
Working Paper: The Fragility of Market Risk Insurance (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12560

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP12560

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().