Replication data for: The Cost of Financial Frictions for Life Insurers

Principal Investigator(s):  View help for Principal Investigator(s) Ralph S. J. Koijen; Motohiro Yogo

Version:  View help for Version V1

Name File Type Size Last Modified
  data 10/11/2019 11:54:PM
  plots 10/11/2019 11:54:PM
Estimate1.do text/plain 2.1 KB 10/11/2019 07:54:PM
Estimate1.smcl text/plain 30.2 KB 10/11/2019 07:54:PM
Estimate2.do text/plain 3.7 KB 10/11/2019 07:54:PM
Estimate2.smcl text/plain 49 KB 10/11/2019 07:54:PM
Estimate3.do text/plain 4.4 KB 10/11/2019 07:54:PM
Estimate3.smcl text/plain 47.5 KB 10/11/2019 07:54:PM
Estimate3a.do text/plain 3.9 KB 10/11/2019 07:54:PM
Estimate3a.smcl text/plain 46.9 KB 10/11/2019 07:54:PM

Project Description

Summary:  View help for Summary 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 frictions, interacting with statutory reserve regulation that allowed life insurers to record far less than a dollar of reserve per dollar of future insurance liability. We identify the shadow cost of capital through exogenous variation in required reserves across different types of policies. The shadow cost was $0.96 per dollar of statutory capital for the average company in November 2008. (JEL G01, G22, G28, G32)

Scope of Project

JEL Classification:  View help for JEL Classification
      G01 Financial Crises
      G22 Insurance; Insurance Companies; Actuarial Studies
      G28 Financial Institutions and Services: Government Policy and Regulation
      G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill


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V1 [2019-10-11]

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