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Working Paper
The adequacy of life insurance: evidence from the health and retirement survey
This study examines life insurance adequacy among married American couples approaching retirement based on the 1992 Health and Retirement Survey with matched Social Security earnings histories. It evaluates each household's life insurance needs based on new financial planning software that embodies a life-cycle-planning model and covers a broad array of demographic, economic, and financial characteristics. A sizable minority of households are significantly underinsured. Almost one third of wives and over 10 percent of husbands would have suffered living-standard reductions greater than 20 ...
Working Paper
Self-fulfilling Runs: Evidence from the U.S. Life Insurance Industry
Is liquidity creation in shadow banking vulnerable to self-fulfilling runs? Investors typically decide to withdraw simultaneously, making it challenging to identify self-fulfilling runs. In this paper, we exploit the contractual structure of funding agreement-backed securities offered by U.S. life insurers to institutional investors. The contracts allow us to obtain variation in investors' expectations about other investors' actions that is plausibly orthogonal to changes in fundamentals. We find that a run on U.S. life insurers during the summer of 2007 was partly due to self-fulfilling ...
Conference Paper
Public policy and life insurance
Working Paper
Consolidation and efficiency in the U.S. life insurance industry
This paper examines the relationship between mergers and acquisitions, efficiency, and scale economies in the U.S. life insurance industry. We estimate cost and revenue efficiency over the period 1988-1995 using data envelopment analysis (DEA). The Malmquist methodology is used to measure changes in efficiency over time. We find that acquired firms achieve greater efficiency gains than firms that have not been involved in mergers or acquisitions. Firms operating with nondecreasing returns to scale and financially vulnerable firms are more likely to be acquisition targets. Overall, mergers and ...
Conference Paper
The effect of capital on portfolio risk at life insurance companies