Investment Returns and Yields to Holders of Insurance
AbstractThis article demonstrates how investment returns can affect yields to holders of insurance policies in a competitive market and empirically tests whether such effects are present. Data for U.S. stock property-liability insurers during 1950-82 are consistent with insurance yields reflecting returns from taxable bonds. Also, the article shows how the pre-1987 U.S. tax code creates an opportunity for arbitrage by insurers between the market for property-liability insurance and the market for tax-exempt securities. Tests for the effect of this arbitrage indicate that tax-exempt/taxable yield ratios for bond maturities lying near five and ten years also have affected yields to holders of insurance. Copyright 1989 by the University of Chicago.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 62 (1989)
Issue (Month): 1 (January)
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Web page: http://www.journals.uchicago.edu/JB/
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- Soon-Ja Lee & Michael L. Smith, . "Property-Casualty Insurance Guaranty Funds and Insurer Vulnerability to Misfortune," Research in Financial Economics 9506, Ohio State University.
- Soon-Jae Lee & Michael L. Smith, . "Property-Casualty Insurance Guaranty Funds And Insurer Vulnerability To Misfortune," Research in Financial Economics 9616, Ohio State University.
- Danny Yeung, 2012. "The Impact of Institutional Ownership: A Study of the Australian Equity Market," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 11, June.
- Lee, Soon-Jae & Smith, Michael L., 1999. "Property-casualty insurance guaranty funds and insurer vulnerability to misfortune," Journal of Banking & Finance, Elsevier, vol. 23(9), pages 1437-1456, September.
- Ronald K. Chung & Hung-Gay Fung & Gene C. Lai & Robert C. Witt, 1994. "Causal Relationships Between Premiums and Losses, and Causes of the Underwriting Cycles," Risk and Insurance 9407008, EconWPA.
- Grace, M. F. & J. L. Hotchkiss, 1993.
"External Impacts on the Property-Liability Insurance Cycle,"
020, Risk and Insurance Archive, revised Feb 1995.
- M. F. Grace & J. L. Hotchkiss, 1994. "External Impacts on the Property-Liability Insurance Cycle," Risk and Insurance 9407002, EconWPA.
- Grace, Martin & Hotchkiss, Julie L., 1995. "External impacts on the property-liability insurance cycle," MPRA Paper 9825, University Library of Munich, Germany.
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