Review of Financial Studies
Andra Ghent, Valentin Haddad, Gabriel Isaac Chodorow-Reich
Department of Finance
Abstract
We construct a new data set tracking the daily value of life insurers? assets at the security level. Outside of the 2008?2009 crisis, a ${$}$ 1 drop in the market value of assets reduces an insurer?s market equity by ${$}$ 0.10. During the ?nancial crisis, this pass-through rises to ${$}$ 1. We explain this pattern by viewing insurance companies as asset insulators, institutions with stable, long-term liabilities that can ride out transitory dislocations in market prices. Illustrating the macroeconomic importance of insulation, insurers? market equity declined by ${$}$50 billion less than the duration-adjusted value of their securities during the crisis.
