Journal article
EXTERNAL FINANCING IN THE LIFE INSURANCE INDUSTRY: EVIDENCE FROM THE FINANCIAL CRISIS
The Journal of risk and insurance, Vol.81(3), pp.529-562
09/2014
DOI: 10.1111/jori.12042
Abstract
The financial crisis and subsequent recession generated sizable operating losses for life insurance companies, yet the consequences were far less significant than for other financial intermediaries. The ability to quickly generate new capital through external issuance and dividend reductions let life insurers maintain healthy levels of equity capital. We use this experience to examine the causes and consequences of external capital issuance by U.S. life insurance companies. We show that, in general, new capital is issued both to support the growth of new business and to replace capital depleted by operating losses. This second channel is particularly important during macroeconomic recessions. Notably, we do not find any evidence that insurers had difficulty generating new capital, unlike other financial service providers that required large amounts of public support. For life insurers, what changed following the financial crisis was the demand to raise external capital, but the supply of external capital appears to have remained constant.
Details
- Title: Subtitle
- EXTERNAL FINANCING IN THE LIFE INSURANCE INDUSTRY: EVIDENCE FROM THE FINANCIAL CRISIS
- Creators
- Thomas R. Berry-Stoelzle - University of GeorgiaGregory P. Nini - Drexel UniversitySabine Wende - University of Cologne
- Resource Type
- Journal article
- Publication Details
- The Journal of risk and insurance, Vol.81(3), pp.529-562
- Publisher
- Wiley
- DOI
- 10.1111/jori.12042
- ISSN
- 0022-4367
- eISSN
- 1539-6975
- Number of pages
- 34
- Language
- English
- Date published
- 09/2014
- Academic Unit
- Finance
- Record Identifier
- 9984380402402771
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