Market discipline and policy loans

Chia-Chun Chiang and Greg Niehaus

Journal of Banking & Finance, 2024, vol. 159, issue C

Abstract: We examine the conditions under which life insurer customers can use a policy loan to protect the unguaranteed cash value in their life insurance policies and annuity contracts from insurer insolvency, and thereby provide market discipline for life insurers. Consistent with policyholders using policy loans to protect their cash value, our empirical evidence indicates that insurers’ policy loan growth rates are negatively associated with measures of insurers’ financial strength, specifically their capital ratios. We also find evidence that the negative association is stronger for insurers that focus on selling annuities.

Keywords: Market discipline; Policy loan; Life insurance (search for similar items in EconPapers)
JEL-codes: G01 G22 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426623002716
Full text for ScienceDirect subscribers only

Related works:
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:eee:jbfina:v:159:y:2024:i:c:s0378426623002716

DOI: 10.1016/j.jbankfin.2023.107076

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().