This paper assesses the risk of a mass lapse event in life insurance. The rarity of the event and the complexity of policyholder behavior, make the risk assessment of such a scenario difficult. Using a simulation study, we evaluate how different estimation methods can assess the scenario when...

I assess how Basel III, Solvency II and the low interest rate environment will affect the financial connection between the bank and insurance sector by changing the funding patterns of banks as well as the investment strategies of life insurance companies. Especially for life insurance...

This paper analyzes the numerical impact of different surplus distribution mechanisms on the risk exposure of a life insurance company selling with profit life insurance policies with a cliquet-style interest rate guarantee. Three representative companies are considered, each using a different...

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...

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...

Life insurers' odds of being placed under regulatory control (for example, conservatorship or receivership) during the financial crisis years of 2008 and 2009 increased with deteriorating fundamentals at a much higher rate than during normal times or during the previous recession. However, no...

Shadow insurance is a regulatory loophole exploited by certain insurance groups to increase risk exposure, potentially destabilizing the financial system. In this paper, we evaluate the contribution of shadow insurance to systemic risk of the global financial sector using a sample of 215...

This paper investigates why U.S. life insurance groups use shadow insurance, i.e., reinsure their risks using affiliated, unauthorized, and unrated off-balance sheet entities rather than traditional reinsurers, and how such activities are allocated to individual group members. We find that such...

The interaction of worsening fundamentals and strategic complementarities among investors renders identification of self-fulfilling runs challenging. We propose a dynamic model to show how exogenous variation in firms' liability structures can be exploited to obtain variation in the strength of...

The interaction of worsening fundamentals and strategic complementarities among investors renders identification of self-fulfilling runs challenging. We propose a dynamic model to show how exogenous variation in firms' liability structures can be exploited to obtain variation in the strength of...