The Fragility of Market Risk Insurance

Ralph Koijen and Motohiro Yogo

No 24182, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Variable annuities, which package mutual funds with minimum return guarantees over long horizons, accounted for $1.5 trillion or 35% of U.S. life insurer liabilities in 2015. Sales decreased and fees increased during the global financial crisis, and insurers made guarantees less generous or stopped offering guarantees to reduce risk exposure. These effects persist in the low interest rate environment after the global financial crisis, and variable annuity insurers suffered large equity drawdowns during the COVID-19 crisis. We develop and estimate a model of insurance markets in which financial frictions and market power determine pricing, contract characteristics, and the degree of market completeness.

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
Note: AP CF IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published as Ralph S.J. Koijen & Motohiro Yogo, 2022. "The Fragility of Market Risk Insurance," Journal of Finance, American Finance Association, vol. 77(2), pages 815-862, April.
Published as RALPH S.J. KOIJEN & MOTOHIRO YOGO, 2022. "The Fragility of Market Risk Insurance," The Journal of Finance, vol 77(2), pages 815-862.

Downloads: (external link)
http://www.nber.org/papers/w24182.pdf (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:nbr:nberwo:24182

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w24182

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 ().