Risk Management and Policy Sales in Life Insurance Companies

72 Pages Posted: 15 Oct 2020

See all articles by Erasmo Giambona

Erasmo Giambona

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate

Anil Kumar

Aarhus University, Department of Economics & Business Economics; Danish Finance Institute

Date Written: September 9, 2020

Abstract

We study the effect of risk management on policy sales (life insurance and annuities) of life insurers. For identification, we exploit the staggered adoption of Section 711 of the Insurer Receivership Model Act, granting derivatives counterparties of insurers the right to terminate the contract and claim the collateral in case of default. We find that hedging by highly leveraged insurers (those that could default) increased sharply post Section 711, relative to unaffected companies. Importantly, policy sales and market share also increased for affected companies, and they are associated to lower policy prices and higher financial stability due to more hedging.

Keywords: Risk management, policy sales (life insurance and annuities), policy prices, financial stability, market share, market leadership, derivatives superpriority

JEL Classification: G22, G28, G31, G32. G33

Suggested Citation

Giambona, Erasmo and Kumar, Anil, Risk Management and Policy Sales in Life Insurance Companies (September 9, 2020). Available at SSRN: https://ssrn.com/abstract=3690012 or http://dx.doi.org/10.2139/ssrn.3690012

Erasmo Giambona (Contact Author)

Syracuse University - Whitman School of Management - Finance Department; James D. Kuhn Center for Real Estate ( email )

721 University Avenue
RM 640
Syracuse, NY 13244-2450
United States
315 443-4885 (Phone)

Anil Kumar

Aarhus University, Department of Economics & Business Economics ( email )

Fuglesangs Alle 4
Aarhus V, 8210
Denmark

Danish Finance Institute ( email )

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
24
Abstract Views
273
PlumX Metrics