Traditionally, individual states have shared responsibility for regulating the US insurance industry. The Dodd-Frank Act changes this by tasking the Federal Reserve with regulating the systemic risks that particularly large insurance organizations might pose and assigning the regulation of...

The Liikanen Group proposes contingent convertible (CoCo) bonds as a potential mechanism to enhance financial stability in the banking industry. Especially life insurance companies could serve as CoCo bond holders as they are already the largest purchasers of bank bonds in Europe. We develop a...

The Liikanen Group proposes contingent convertible (CoCo) bonds as a potential mechanism to enhance financial stability in the banking industry. Especially life insurance companies could serve as CoCo bond holders as they are already the largest purchasers of bank bonds in Europe. We develop a...

Banks and other financial institutions which were too-big-to-fail (TBTF) played a central role during the Global Financial Crisis of 2007-2009. The present article lays out how misguided policies enabled banks to grow both in size as well as in complexity and therefore acquire TBTF status,...

Global financial regulators are currently reflecting on the nature of the insurance business. Specifically, they are trying to classify insurance into "traditional" and "non-traditional" activities, and to distinguish them from "non-insurance" activities. Subsequently, they will seek to apply...

Life insurers massively sell savings contracts with surrender options which allow policyholders to withdraw a guaranteed amount before maturity. These options move toward the money when interest rates rise. Using data on German life insurers, we estimate that a 1 percentage point increase in...

Life insurers sell savings contracts with surrender options, allowing policyholders to prematurely withdraw guaranteed surrender values. Surrender options move toward the money when interest rates rise. Hence, higher interest rates raise surrender rates, as we document for the German life...

The inherent tensions in the financial sector mean that episodes of extreme stress are inevitable, if unpredictable. This is so even if the regulatory and supervisory regimes are in many respects effective. The capacity of government to intervene may determine whether the distress is confined to...

Historical evidence like the global financial crisis from 2007-09 highlights that sector concentration risk can play an important role for the solvency of insurers. However, current microprudential frameworks like the US RBC framework and Solvency II consider only name concentration risk...

In MetLife, Inc. v. Financial Stability Oversight Council, Civil Action No. 15-0045 (RMC) (D.D.C. March 30, 2016), the U.S. District Court for the District of Columbia overturned the designation of MetLife, Inc., as a systemically important financial institution regulated by the Federal Reserve...