Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/208333 
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2299
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Traditionally, insurers are seen as stabilisers of financial markets that act countercyclically by buying assets whose price falls. Recent studies challenge this view by providing empirical evidence of procyclicality. This paper sheds new light on the underlying reasons for these opposing views. Our model predicts procyclicality when prices fall due to increasing risk premia, and countercyclicality in response to rises in the risk-free rate. Using granular data on insurers' government bond holdings, we validate these predictions empirically. Our findings contribute to the current policy discussion on macroprudential measures beyond banking.
Subjects: 
insurance companies
cyclicality
portfolio allocation
financial stability
sovereign debt crisis
JEL: 
G01
G11
G12
G22
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3561-6
Document Type: 
Working Paper

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