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A Retrospective on the Life Insurance Sector after the Failure of Silicon Valley Bank

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Abstract

Following the Silicon Valley Bank collapse, the stock prices of U.S banks fell amid concerns about the exposure of the banking sector to interest rate risk. Thus, between March 8 and March 15, 2023, the S&P 500 Bank index dropped 12.8 percent relative to S&P 500 returns (see right panel of the chart below). The stock prices of insurance companies tumbled as well, with the S&P 500 Insurance index losing 6.4 percent relative to S&P 500 returns over the same time interval (see the center panel below). Yet, insurance companies’ direct exposure to the three failed banks (Silicon Valley Bank, Silvergate, and Signature Bank) through debt and equity was modest. In this post, we examine the possible factors behind the reaction of insurance investors to the failure of Silicon Valley Bank.

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  • Fulvia Fringuellotti & Saketh Prazad, 2024. "A Retrospective on the Life Insurance Sector after the Failure of Silicon Valley Bank," Liberty Street Economics 20240410, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:98050
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    Keywords

    insurance companies; stock returns; Silicon Valley Bank (SVB);
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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