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Shifting landscapes: life insurance and financial stability

Author

Listed:
  • Fabian Garavito
  • Ulf Lewrick
  • Tomas Stastny
  • Karamfil Todorov

Abstract

The past decade's low rate environment challenged traditional life insurers' business models and has been a catalyst for ongoing shifts in the sector. To sustain profitability, life insurers have increased exposures to riskier and less liquid asset classes. Some have also offloaded risks through complex reinsurance agreements, often to offshore centres, partly with an eye to economising on capital. Private equity firms have been a driving force behind these trends. They have funnelled investment into private markets by acquiring or partnering with life insurers or assuming insurance portfolios through affiliated reinsurers. While more diversified investments and greater risk-sharing can, in principle, support insurers' resilience, losses in private markets could propagate risks across an increasingly interconnected and complex insurance landscape.

Suggested Citation

  • Fabian Garavito & Ulf Lewrick & Tomas Stastny & Karamfil Todorov, 2024. "Shifting landscapes: life insurance and financial stability," BIS Quarterly Review, Bank for International Settlements, September.
    • Handle: RePEc:bis:bisqtr:2409b
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    References listed on IDEAS

    as
    1. Andrew Ellul & Chotibhak Jotikasthira & Christian T. Lundblad & Yihui Wang, 2015. "Is Historical Cost Accounting a Panacea? Market Stress, Incentive Distortions, and Gains Trading," Journal of Finance, American Finance Association, vol. 70(6), pages 2489-2538, December.
    2. Divya Kirti & Natasha Sarin, 2024. "What Private Equity Does Differently: Evidence from Life Insurance," The Review of Financial Studies, Society for Financial Studies, vol. 37(1), pages 201-230.
    3. Dietrich Domanski & Hyun Song Shin & Vladyslav Sushko, 2017. "The Hunt for Duration: Not Waving but Drowning?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(1), pages 113-153, April.
    4. Ellul, Andrew & Lundblad, Christian T & Wang, Yihui & Jotikasthira, Chotibhak, 2015. "Is Historical Cost Accounting a Panacea? Market Stress, Incentive Distortions, and Gains Trading," CEPR Discussion Papers 10450, C.E.P.R. Discussion Papers.
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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