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Monday, August 2 • 10:45am - 12:15pm
1A2 Asset-Driven Insurance Pricing

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Benjamin Knox, Copenhagen Business School ; Jakob Sørensen, Copenhagen Business School

We develop a theory that connects insurance premiums, insurance companies' investment behavior, and equilibrium asset prices. Consistent with the model's key predictions, we show empirically that (1) insurers with more stable insurance funding take more investment risk and, therefore, earn higher average investment returns; (2) insurance premiums are lower when expected investment returns are higher, both in the cross section of insurance companies and in the time series. We show our results hold for both life insurance companies and, using a novel data set, for property and casualty insurance companies. Consistent findings across different regulatory frameworks helps identify asset-driven insurance pricing while controlling for alternative explanations.

avatar for Cameron Ellis

Cameron Ellis

Temple University


Benjamin Knox

Copenhagen Business School

Monday August 2, 2021 10:45am - 12:15pm EDT