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Affiliated reinsurance and insurer performance under capital regulation

Author

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  • Yi, Minli
  • Yang, Yang
  • Lin, Jyh-Horng

Abstract

The paper develops a two-stage framework that an operating insurer purchases reinsurance from its affiliated reinsurer within the holding company under capital regulation. Stringent capital regulation to the operating insurer harms its affiliate's survival but helps the operating insurer's survival, the holding company's survival, and policyholder protection. Stringent capital regulation to the affiliate increases its optimal affiliated reinsurance and the policyholder protection, thereby contributing to insurance stability.

Suggested Citation

  • Yi, Minli & Yang, Yang & Lin, Jyh-Horng, 2021. "Affiliated reinsurance and insurer performance under capital regulation," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612319310918
    DOI: 10.1016/j.frl.2020.101584
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    References listed on IDEAS

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    1. Ralph S. J. Koijen & Motohiro Yogo, 2015. "The Cost of Financial Frictions for Life Insurers," American Economic Review, American Economic Association, vol. 105(1), pages 445-475, January.
    2. Mattias K. Polborn, 1998. "A Model of an Oligopoly in an Insurance Market," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 23(1), pages 41-48, June.
    3. Tobias Adrian & Adam B. Ashcraft & Nicola Cetorelli, 2013. "Shadow bank monitoring," Staff Reports 638, Federal Reserve Bank of New York.
    4. Eric Briys & François De Varenne, 1994. "Life Insurance in a Contingent Claim Framework: Pricing and Regulatory Implications," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 19(1), pages 53-72, June.
    5. repec:bla:jfinan:v:59:y:2004:i:2:p:831-868 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Chen, Shi & Duan, Xiaoyu & Chiu, Shiu-Chieh & Lin, Jyh-Horng, 2024. "Insurer hedging amidst the interplay of black and green swans toward SDGs 3 and 7," Energy Economics, Elsevier, vol. 135(C).

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    More about this item

    Keywords

    Affiliated reinsurance; Capital regulation; Policyholder protection;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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