Accounting Rule–Driven Regulatory Capital Management and its Real Effects for U.S. Life Insurers

Dong, Qingkai; Kim, Se-Hwa; Ryan, Stephen G.

doi:10.2139/ssrn.3975641

Cited by 1 publication

(4 citation statements)

References 16 publications

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Section: Discussionmentioning

confidence: 99%

“…However, the regulators’ task to assess the risk concentration of life insurers is hindered by alternative mechanisms (such as shadow insurance), which enables life insurers to reduce risk-based capital and increase leverage (Koijen and Yogo, 2017). Nevertheless, Dong et al (2021) find that stricter state-level regulation inhibits life insurers’ reliance on shadow insurance.…”

Section: The Us Solvency and Market Conduct Regulation And The Effect...mentioning

confidence: 96%

“…Nevertheless, Dong et al (2021) find that stricter state-level regulation inhibits life insurers' reliance on shadow insurance.…”

Section: Jfrc 305mentioning

confidence: 97%

“…On the other side, the better consumer protection from the decentralized regulatory setup is reflected in the enforcement of market conduct regulations. Moreover, Dong et al (2021) claim that the differences in the regulation enforcement among the US states with respect to shadow insurance affect life insurers’ tendencies to use shadow insurance to manage their regulatory capital. Alternative to this view that life insurers’ behavior is dictated by stricter regulation enforcement, we find that the US life insurers internalize the costs of stricter regulations, which affect their location decisions.…”

Section: Introductionmentioning

confidence: 99%

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Regulatory examinations and life insurance development

Srbinoski¹,

Poposki

Born

et al. 2022

JFRC

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Purpose Solvency and market conduct regulations play a crucial role in supporting life insurance development by boosting consumer confidence and securing a stable environment for insurers to write business. The regulation encapsulates not only the legal framework but also its enforcement. This study aims to focus on the latter and investigate the impact of solvency and market conduct examinations on life insurance development within a homogenous legal environment in the USA. Design/methodology/approach To test the relationship between the regulatory examinations and life insurance development, this study uses annual data for 51 US states over the period 2013–2018 and uses fixed and random effects panel regressions controlling for the possible omitted variables bias and serial correlation. This study constructs two groups of indicators to measure the robustness and ability of regulators to prevent insolvencies and opportunistic market practices and estimate their effects on market development. Findings The results show that more stringent regulators with respect to solvency examinations deter life insurers from their markets and channel to those markets with lenient examiners, hurting the development of life insurance in the stringent states. Additionally, regulators boost consumer confidence by providing robust market conduct practices, which results in higher life insurance demand. Originality/value This study contributes to the debates about the pros and cons of the current state-led regulation in the USA and the general benefits/costs of regulation for insurance market development.

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Section: Discussionmentioning

confidence: 99%

Section: The Us Solvency and Market Conduct Regulation And The Effect...mentioning

confidence: 96%

“…Nevertheless, Dong et al (2021) find that stricter state-level regulation inhibits life insurers' reliance on shadow insurance.…”

Section: Jfrc 305mentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations