Affiliation:
1. Harvard University and NBER
2. University of North Carolina, Chapel Hill
3. UCLA and NBER
Abstract
Abstract
We construct a new data set tracking the daily value of life insurers’ assets at the security level. Outside of the 2008–2009 crisis, a ${\$}$ 1 drop in the market value of assets reduces an insurer’s market equity by ${\$}$ 0.10. During the ?nancial crisis, this pass-through rises to ${\$}$ 1. We explain this pattern by viewing insurance companies as asset insulators, institutions with stable, long-term liabilities that can ride out transitory dislocations in market prices. Illustrating the macroeconomic importance of insulation, insurers’ market equity declined by ${\$}$50 billion less than the duration-adjusted value of their securities during the crisis.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Accounting
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