The importance of managerial decisions related to interest-sensitive cash flows has received considerable attention in the insurance literature. Consistent with the interest-sensitive nature of insurer assets and liabilities, empirical research has shown that insurer insolvency is significantly related to interest rate volatility. We investigate the interest rate sensitivity of monthly stock returns of life insurers based on a generalized autoregressive conditionally heteroskedastic in the mean (GARCH-M) model. We examine three different portfolios (equally weighted, risk-based, and size-based) with binary variables to explicitly account for varying interest rate strategies adopted by the Federal Reserve System. Results based on data for the period 1975 through 2000 indicate that life insurer equity values are sensitive to long-term interest rates and that interest sensitivity varies across subperiods and across riskbased and size-based portfolios. The results complement insolvency research that links insurer financial performance to changes in interest rates.Elijah Brewer III is at Federal Reserve Bank of Chicago, Chicago, IL 60604-1413; James M. Carson is at . The authors thank the editor, two anonymous referees, James Doran, participants at meetings of SRIA and SFA, and seminar participants at the University of Georgia and the University of Iowa for constructive comments and helpful suggestions that improved the quality of the article. The views expressed here are those of the authors and do not represent the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of Chicago. INTEREST RATE RISK AND EQUITY VALUES 403financial institutions. We then describe our sample, data, and methodology. Next we analyze the empirical results, and the final section summarizes and concludes. REVIEW OF RELATED LITERATUREInsurers issue stochastic debt instruments for which the amount and timing of loss payments (contingent claims) are unknown at policy issuance, and they invest the proceeds to maximize the risk-adjusted return on capital. By effectively "borrowing" from policy owners, insurers lever ownership capital. Interest rate risk, defined as the degree of exposure, or elasticity, of insurer net worth to changes in the interest rate, is important to life insurers for a number of reasons, as discussed, e.g., by Staking and Babbel (1995) and Briys and Varenne (1997). The importance of interest rate risk is based on (1) the investment portfolio of the typical highly leveraged insurer is concentrated in long-term fixed-income securities; (2) life insurer performance is negatively related to changes in interest rates Hoyt, 1999, 2001);(3) for insurers whose duration of assets exceeds that of their liabilities, rising interest rates erode the value of surplus, leading to increased leverage and a greater probability of ruin; (4) higher leverage increases the insurer's cost of capital (Cummins and Lamm-Tennant, 1994); and (5) interest rate risk leads insurers to take steps to match asset-liability durations ...

This paper uses an approach developed by Flannery and James to show that interest rate changes have different effects on equity values of hedged and unhedged financial institutions. Equity values of (generally unhedged) savings and loans are significantly more sensitive to unexpected interest rate changes than equities of (generally hedged) commercial banks. The interest rate sensitivity of (generally hedged) life insurance equities is similar to that of bank equities. Overall, the equity values of unhedged financial institutions are more sensitive to interest rate changes than the equity values of financial institutions that more closely balance the maturities of their assets and liabilities.

The US insurance industry has long faced the spectrum of large unexpected losses from natural catastrophes such as hurricanes and earthquakes. However, the September 11, 2001 terrorist attack clearly demonstrated a new form of catastrophic risk of man‐made origin. The damages in property and life are now well known as estimates of insured losses deriving from this event range from $40 to $54 billion. The 9/11 terrorist attacks renewed the capacity problem faced the insurance industry in the underwriting of large catastrophic risk. In that regard, this paper explores the feasibility of capital market alternatives to the conventional insurance mechanism, and analyses whether the capital market could provide extra capacity to absorb terrorism risk.

Purpose Grade ≥3 adverse effects prolong hospitalization and reduce chemotherapy dose intensity. The purpose of this study was to evaluate the rate and severity of high-dose methotrexate-related acute kidney injury and analyze its effect on hospital length of stay and relative chemotherapy dose intensity. Methods This was a retrospective cohort analysis. Patients receiving ≥1 dose of high-dose methotrexate were analyzed for acute kidney injury and length of stay. Patients receiving ≥6 cycles of induction therapy were included in the analysis of relative chemotherapy dose intensity. Chi squared analysis was used to determine the differences between dichotomous data; Student's t-test for parametric data and Mann-Whitney U test for non-parametric data for continuous variables. Statistical analyses were performed with IBM SPSS Statistics (version 21). Results Twenty-six patients and 194 treatment encounters were identified. Thirteen patients were evaluated for relative chemotherapy dose intensity. Grade ≥3 acute kidney injury occurred in four patients (15% of patients; 2% of encounters). There were no grade 5 adverse events. Mean length of stay for encounters with grade ≥3 acute kidney injury was almost three times longer than for those with ≤ grade 2 acute kidney injury (p = 0.041). Mean relative chemotherapy dose intensity was reduced approximately in half for patients experiencing grade ≥3 acute kidney injury (p < 0.01). The most common adverse events were hypokalemia and nausea. Proton pump inhibitors were the most frequently co-administered medications with the potential to affect high-dose methotrexate pharmacokinetics. Conclusion At our cancer program, the rate of grade ≥3 acute kidney injury with high-dose methotrexate is similar to that reported by others. Grade ≥3 acute kidney injury following high-dose methotrexate administration significantly prolonged length of stay and reduced relative chemotherapy dose intensity.

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