Asset Insulators


Chodorow-Reich, Gabriel, Andra Ghent, and Valentin Haddad. 2021. “Asset Insulators.” Review of Financial Studies 34 (3): 1509–1539.


We construct a new dataset tracking the daily value of life insurers' assets at the security level. Outside of the 2008-09 crisis, a $1 drop in the market value of assets reduces an insurer's market equity by \$0.10. During the financial crisis, this pass-through rises to 1. We explain this pattern by viewing insurance companies as asset insulators, institutions with stable, long-term liabilities that can ride out transitory dislocations in market prices. Illustrating the macroeconomic importance of insulation, insurers' market equity declined by $50 billion less than the duration-adjusted value of their securities during the crisis.

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Last updated on 07/19/2021