Local religious beliefs and insurance companies’ risk-taking behaviour

We empirically examine the effect of local religious beliefs on the risk-taking behaviour of U.S. life insurers headquartered in that region. We distinguish between insurers that predominantly write annuities and insurers that predominantly write life insurance policies; the annuity business is relatively riskier than writing life insurance. Insurers headquartered in high-Catholic or low-Protestant areas are more likely to be annuity writers. Annuity writers located in high-Catholic or low-Protestant areas invest more in risky assets and exhibit higher investment return volatilities, as well as a higher volatility of their return on assets. Overall, our results suggest that local culture has significant influences on life insurers’ behaviour.