Gambling for recovery? Exploring the riskiness of European insurers' assets during the Covid-19 crisis 2020

Marcel Beyer

No 46/23, ICIR Working Paper Series from Goethe University Frankfurt, International Center for Insurance Regulation (ICIR)

Abstract: In crisis times, insurance companies might feel the pressure to present a performance of their investment portfolios that is superior to the market, since investment portfolios back the claims of policyholders and serve as a signal for the claims' safety. I seek to show whether a stock market crisis as experienced over the course of the Covid-19 pandemic influences insurance firms' decisions on the allocation of credit risk bearing assets in their investment portfolio. I find, consistently with previous research, that insurers shift their portfolio holdings towards lower credit risk assets as financial market conditions tighten. This tendency seems to be restricted by the liquidity risk of high-yield assets, and the credit risk of lower-rated investment-grade assets. Both effects ultimately lead to a larger fraction of less liquid assets during the crisis and the recovery.

Keywords: Insurance; Covid-19; Financial Stability (search for similar items in EconPapers)
JEL-codes: G01 G11 G22 G32 (search for similar items in EconPapers)
Date: 2023, Revised 2023
New Economics Papers: this item is included in nep-ban, nep-eec and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:icirwp:4623

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