Regulatory Forbearance in the US Insurance Industry: The Effects of Removing Capital Requirements for an Asset Class

• 成果类型: Article
• 署名作者: Becker, Bo; Opp, Marcus M.; Saidi, Farzad
• 署名单位: Stockholm School of Economics; Center for Economic & Policy Research (CEPR); European Corporate Governance Institute; University of Bonn
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab102
• 发表日期: 2022
• 页码: 5438
• 关键词: credit ratings; cost

摘要

We analyze the effects of a reform of capital regulation for U.S. insurance companies in 2009. The reform eliminates capital buffers against unexpected losses associated with portfolio holdings of MBS, but not for other fixed-income assets. After the reform, insurance companies are much more likely to retain downgraded MBS compared to other downgraded assets. This pattern is more pronounced for financially constrained insurers. Exploiting discontinuities in the reform's implementation, we can identify the relevance of the capital requirements channel. We also document that the insurance industry crowds outs other investors in the new issuance of (high-yield) MBS.