Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 16, 2022 erstellt
Description:
We explore whether life insurers use a unique reinsurance arrangement to manage their regulatory capital. Typical reinsurance arrangements allow insurers to reduce their regulatory capital by transferring liabilities, and the associated assets, to reinsurers. With modified coinsurance, insurers maintain control of their assets yet transfer the regulatory capital requirements to the reinsurer. We find insurers with modified coinsurance are less likely to sell downgraded bonds. Moreover, most modified coinsurance is purchased from reinsurers located in countries with lower regulatory capital requirements and within the same insurance holding group. Our findings expose how insurers use reinsurance to obfuscate their asset risk