Public policy and life insurance
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 ...
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.
The effect of capital on portfolio risk at life insurance companies
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 ...