IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2608.20982.html

Surrender runs

Author

Listed:
  • Andreas Loffler
  • Stefan Steins

Abstract

Rising interest rates can expose life insurers to surrender risk by reducing the market value of their assets and raising policyholders' outside returns. This paper develops a minimal model of an insurance-specific run mechanism in which strategic interaction arises because early surrenders can deplete the asset pool backing continuation values. We analyze a strategic surrender game in which a run is an equilibrium outcome determined jointly by asset values, contractual surrender claims, and payoff-dependent continuation benefits. The model yields closed-form interest-rate thresholds for fundamentals-driven and self-fulfilling runs. Thinner capitalization weakly lowers the joint-surrender cutoff. Continuation benefits raise surrender thresholds but can also create strategic complementarity.

Suggested Citation

  • Andreas Loffler & Stefan Steins, 2026. "Surrender runs," Papers 2608.20982, arXiv.org.
    • Handle: RePEc:arx:papers:2608.20982
    as

    Download full text from publisher

    File URL: https://arxiv.org/pdf/2608.20982
    File Function: Latest version
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2608.20982. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: https://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.