The Cost of Financial Frictions for Life Insurers

• 成果类型: Article
• 署名作者: Koijen, Ralph S. J.; Yogo, Motohiro
• 署名单位: University of London; London Business School; Federal Reserve System - USA; Federal Reserve Bank - Minneapolis
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20121036
• 发表日期: 2015
• 页码: 445-475
• 关键词: insurance; capacity

摘要

During the financial crisis, life insurers sold long-term policies at deep discounts relative to actuarial value. The average markup was as low as -19 percent for annuities and -57 percent for life insurance. This extraordinary pricing behavior was due to financial and product market frictions, interacting with statutory reserve regulation that allowed life insurers to record far less than a dollar of reserve per dollar of future insurance liability. We identify the shadow cost of capital through exogenous variation in required reserves across different types of policies. The shadow cost was $0.96 per dollar of statutory capital for the average company in November 2008.