The objective of this paper is to evaluate the extent to which the design of regulatory banking and insurance capital standards (Basel II/III and Solvency II) provide incentives for endogenously‐generated destabilising effects to the financial system. The literature has identified three areas...

The alarming rise in drinking water pollution across the U.S. is often attributed to cost cutting pressures faced by local officials. We know little, however, about why these pressures are so severe for some cities compared to others. We present a new theory to argue that an important...

Existing stress tests do not capture feedback loops between individual institutions and the financial system. To identify feedback loops, the European Systemic Risk Board has developed macroprudential surveys that ask banks and insurers how they would behave in a macroeconomic stress scenario....

Financial intermediaries often provide guarantees that resemble out-of-the-money put options, exposing them to tail risk. Using the U.S. life insurance industry as a laboratory, we present a model in which variable annuity (VA) guarantees and associated hedging operate within the regulatory...

This paper estimates insurance requirements against natural disasters (NDs) in the Eastern Caribbean Currency Union (ECCU) using an insurance layering framework. The layers include a government saving fund, as well as market instruments. Each layer is calibrated to cover estimated fiscal cost of...

This paper evaluates the contributions of federal credit and insurance programs based on their effectiveness in addressing imperfections in credit and insurance markets, including adverse selection caused by asymmetric information, moral hazard resulting from monitoring difficulties, resource...

The review of the Solvency II framework is the biggest and most important regulatory change of the EU insurance regulation since 2014. It tackles both level 1 and level 2 regulations. It has been long awaited and was significantly delayed because of the pandemic. Ultimately, the European...

A white-box deterministic system simulates long-term LDI cashflows using as input J.P.Morgan Long Term Capital Market Assumptions adapted to make them interest rate dependent. Trading, coupons and dividends provide cashflows to pay liabilities and extract excess cash to stakeholders while...

At the start of Solvency II in January 2016, there is no overview of the insurance market in Europe. This paper develops a methodology to link various datasets on foreign branches and subsidiaries. The result is a new and comprehensive dataset of cross-border insurance in Europe. We find that...

I examine competition in the sector of mortgage life insurance, in particular the Periodic Switching Right (PSR), by which the borrower can change his insurer once every period (say, every year). The PSR is likely to have pro competitive effects (lower premium), but by the same move, to lead to...