TY  - UNPD
A1  - Beyer, Marcel
T1  - Gambling for recovery? Exploring the credit risk of European insurers' bond portfolios during the Covid-19 market crash
N2  - In times of crisis, insurance companies may invest into riskier assets to benefit from expected price recoveries. Using daily stock market data for 34 European insurers, I investigate how a stock market contraction, as experienced during the Covid-19 pandemic, affects insurers’ decision on the allocation of their corporate bond portfolio. I find that insurers shift their portfolio holdings pro-cyclically towards lower credit risk assets in the first month of the market contraction. As the crisis progresses, I find evidence for counter-cyclical investment behavior by insurers, which can neither be explained by credit rating downgrades of held bonds nor by hedging with CDS derivatives. The observed counter-cyclical investment behavior of insurers could be beneficial for the financial system in attenuating price declines, but excessive risk-taking by insurance companies over longer periods can also reinforce stress in the system.
T3  - ICIR Working Paper Series - No. 46/2023 [3.2024] 
KW  - Insurance
KW  - Financial Crisis
KW  - Financial Stability
Y1  - 2024
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/77275
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-772756
UR  - https://www.icir.de/fileadmin/user_upload/editors/documents/working_papers/wp_46_gambling_for_recovery_icir.pdf
PB  - Goethe-Universität Frankfurt, International Centre for Insurance Regulation (ICIR)
CY  - Frankfurt am Main
ER  -