Market Discipline and Government Guarantees in Life Insurance
نویسنده
چکیده
This paper studies the e¤ects of company risk and state government guarantees on the behavior of ordinary life policyholders during the 1988-1998 period. Consistent with market discipline, it ...nds a strong positive relationship between company default risk and policyholder termination rates. The paper ...nds only weak evidence of a decline in market discipline following the creation of government-backed guaranty funds. ¤This is a preliminary draft. Please do not cite or redistribute without permission. I thank Arturo Estrella, Charlie Himmelberg, Jim Mahoney, Stavros Peristiani, Tony Rodrigues, and Til Schuermann for helpful discussions and comments, David Cummins and Anita Lo for help with the data, and Priya Gandhi for research assistance. Errors are mine. The views expressed in this article are those of the author and do not necessarily re‡ect the position of the Federal Reserve Bank of New York or the Federal Reserve System.
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