Variable Annuities and Systemic Risk
This chapter argues that variable annuities may cause systemic risk in the insurance sector. Life insurers, in particular in the US, have transformed their business by moving from largely diversifiable activities to taking on market risk. This exacerbated by the fact the variable annuities are typic...
Guardado en:
| Autor principal: | |
|---|---|
| Formato: | Article ou chapitre numérique |
| Lenguaje: | Français |
| Publicado: |
2020
|
| Acceso en línea: | Accès Université d'Orléans et IFPM Accès Université d'Orléans et IFPM |
| id |
cairn-RINDU1_201_0062 |
|---|---|
| record_format |
cairn |
| spelling |
cairn-RINDU1_201_0062RINDU1Annales des Mines - Réalités industrielles https://stm.cairn.info/revue-realites-industrielles-2020-1-page-62?lang=en https://doi.org/10.3917/rindu1.201.0062 Variable Annuities and Systemic Risk Wagner, Wolf2020 fre Annales des Mines - Réalités industrielles | Février 2020 | 1 | 2020-01-22 | p. 62-65 | 1148-7941 RINDU1_20177 This chapter argues that variable annuities may cause systemic risk in the insurance sector. Life insurers, in particular in the US, have transformed their business by moving from largely diversifiable activities to taking on market risk. This exacerbated by the fact the variable annuities are typically supplemented with guarantees. Such guarantees are effectively put-options on the stock market and expose insurers to significant stock market risk. Although insurers hedge a large fraction of the guarantees, the hedging also causes insurers to shift their asset allocation towards illiquid bonds. This backfires in the event of a correlated shock, where collective firesales of illiquid bonds result. The implications for the capital of the US life insurance sector, and systemic risk, are significant.Cairn free access |
| language |
Français |
| format |
Article ou chapitre numérique |
| building |
0/Bibliothèque numérique/ 1/Bibliothèque numérique/Cairn/ |
| description |
This chapter argues that variable annuities may cause systemic risk in the insurance sector. Life insurers, in particular in the US, have transformed their business by moving from largely diversifiable activities to taking on market risk. This exacerbated by the fact the variable annuities are typically supplemented with guarantees. Such guarantees are effectively put-options on the stock market and expose insurers to significant stock market risk. Although insurers hedge a large fraction of the guarantees, the hedging also causes insurers to shift their asset allocation towards illiquid bonds. This backfires in the event of a correlated shock, where collective firesales of illiquid bonds result. The implications for the capital of the US life insurance sector, and systemic risk, are significant. |
| author |
Wagner, Wolf |
| spellingShingle |
Wagner, Wolf Variable Annuities and Systemic Risk |
| author_facet |
Wagner, Wolf |
| author_sort |
Wagner, Wolf |
| title |
Variable Annuities and Systemic Risk |
| title_short |
Variable Annuities and Systemic Risk |
| title_full |
Variable Annuities and Systemic Risk |
| title_fullStr |
Variable Annuities and Systemic Risk |
| title_full_unstemmed |
Variable Annuities and Systemic Risk |
| title_sort |
variable annuities and systemic risk |
| publishDate |
2020 |
| container_title |
|
| container_issue |
|
| url |
https://ezproxy.univ-orleans.fr/login?url=https://stm.cairn.info/revue-realites-industrielles-2020-1-page-62?lang=en https://ezproxy.univ-orleans.fr/login?url=https://doi.org/10.3917/rindu1.201.0062 |
| _version_ |
1877246680028413952 |