The Fragility of Market Risk Insurance

Ralph S.J. Koijen, Motohiro Yogo

Research output: Contribution to journalArticlepeer-review

18 Scopus citations


Variable annuities, which package mutual funds with minimum return guarantees over long horizons, accounted for $1.5 trillion or 35% of U.S. life insurer liabilities in 2015. Sales decreased and fees increased during the global financial crisis, and insurers made guarantees less generous or stopped offering guarantees to reduce risk exposure. These effects persist in the low-interest rate environment after the global financial crisis, and variable annuity insurers suffered large equity drawdowns during the COVID-19 crisis. We develop and estimate a model of insurance markets in which financial frictions and market power determine pricing, contract characteristics, and the degree of market completeness.

Original languageEnglish (US)
Pages (from-to)815-862
Number of pages48
JournalJournal of Finance
Issue number2
StatePublished - Apr 2022

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'The Fragility of Market Risk Insurance'. Together they form a unique fingerprint.

Cite this