Portfolio Similarity and Asset Liquidation in the Insurance Industry

We examine whether the concern of academics and regulators about the potential for insurers tosell similar assets due to the overlap in their holdings is justified. We measure this overlap usingcosine similarity and find that insurers with more similar portfolios have larger subsequent commonsales. When faced with a shock to their assets or liabilities, exposed insurers with greater portfoliosimilarity have larger common sales that impact prices. Our portfolio similarity measure can beused by regulators to predict the common selling of any institution that reports security or assetclass holdings regardless of its public company status, making the measure a useful ex-ante predictor of divestment behavior in times of market stress