LIFE-INSURANCE COMPANY RISK EXPOSURE - MARKET EVIDENCE AND POLICY IMPLICATIONS

Authors
BREWER E MONDSCHEAN TH
Citation
E. Brewer et Th. Mondschean, LIFE-INSURANCE COMPANY RISK EXPOSURE - MARKET EVIDENCE AND POLICY IMPLICATIONS, Contemporary policy issues, 11(4), 1993, pp. 56-69
Citations number
21
Categorie Soggetti
Public Administration",Economics
Journal title
Contemporary policy issues → ACNP
ISSN journal
07350007
Volume
11
Issue
4
Year of publication
1993
Pages
56 - 69
Database
ISI
SICI code
0735-0007(1993)11:4<56:LCRE-M>2.0.ZU;2-A
Abstract
Life insurance company (LIC) risk exposure increased during the 1980s while capital ratios declined. State guarantee funds that exist to han dle policyholder's losses in the event of LIC failure can create incen tives for excessive risk taking, just as the federal deposit insurance system did for savings and loan associations. This paper examines the relationship between stock market risk and LIC risk exposure. A sampl e of 44 LICs revealed that stock market risk is positively related to financial leverage as well as to differences in asset mix. This findin g confirms that market data can help identify LICs with greater risk e xposure.