Shadow Insurance

Ralph Koijen and Motohiro Yogo

No 19568, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Life insurers use reinsurance to move liabilities from regulated and rated companies that sell policies to shadow reinsurers, which are less regulated and unrated off-balance-sheet entities within the same insurance group. U.S. life insurance and annuity liabilities ceded to shadow reinsurers grew from $11 billion in 2002 to $364 billion in 2012. Life insurers using shadow insurance, which capture half of the market share, ceded 25 cents of every dollar insured to shadow reinsurers in 2012, up from 2 cents in 2002. By relaxing capital requirements, shadow insurance could reduce the marginal cost of issuing policies and thereby improve retail market efficiency. However, shadow insurance could also reduce risk-based capital and increase expected loss for the industry. We model and quantify these effects based on publicly available data and plausible assumptions.

JEL-codes: G22 G28 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-ias
Note: AP CF PE
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as Ralph S. J. Koijen & Motohiro Yogo, 2016. "Shadow Insurance," Econometrica, Econometric Society, vol. 84, pages 1265-1287, 05.

Downloads: (external link)
http://www.nber.org/papers/w19568.pdf (application/pdf)

Related works:
Journal Article: Shadow Insurance (2016)
Working Paper: Shadow Insurance (2016)
Working Paper: Shadow Insurance (2014)
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:nbr:nberwo:19568

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w19568

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().