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Journal Article
The sensitivity of life insurance firms to interest rate changes
The authors examine the interest rate risk of life insurers by estimating the sensitivity of their stock returns to changes in the return on bonds over a time frame that includes a relatively calm period before the recent financial crisis, the financial crisis itself, and the recent period of low interest rates. They find that when bonds increase in value (that is, when interest rates fall), stocks of large insurance firms decrease in value more than those of their smaller counterparts.
Newsletter
What do U.S. life insurers invest in?
Researchers at the Chicago Fed Insurance Initiative are analyzing the role that the insurance industry plays in financial markets and the economy as a whole. This article presents an overview of life insurers? financial asset holdings, the industries they invest in, and how the value of their investments would change if there was a large negative shock to asset values.
Newsletter
How Much Risk Do Variable Annuity Guarantees Pose to Life Insurers?
Over the past two decades, guarantees that protect variable annuities? balances when their underlying investments perform poorly have become quite popular. Collectively, these guarantees can pose a sizable risk to life insurers. This article explores the different types of variable annuity guarantees, the extent of the risk they pose to insurers, and the practices used by insurers to mitigate against such risk.