Are US Life Insurers the New Shadow Banks?

39 Pages Posted: 25 Feb 2020 Last revised: 10 Sep 2021

See all articles by Nathan Foley-Fisher

Nathan Foley-Fisher

Board of Governors of the Federal Reserve System

Nathan Heinrich

Board of Governors of the Federal Reserve System

Stephane Verani

Board of Governors of the Federal Reserve System

Date Written: September 10, 2021

Abstract

We show that the largest U.S. life insurers entered corporate loan markets as banks refocused on commercial banking from 2009, against a backdrop of unconventional monetary policies and tighter bank regulations. Through complex on- and off-balance sheet arrangements, these insurers, many of whom are controlled by private equity firms, are acquiring and deploying vast amounts of insurance liabilities to fill the void left by banks. Using the COVID-19 pandemic, we show that life insurers have become more vulnerable to an aggregate shock to the corporate sector and disproportionately benefited from the Fed response to the pandemic.

Keywords: shadow banking, insurance companies, annuities, private debt, private equity, leveraged loans, collateralized loan obligations

JEL Classification: G23, G12, G18

Suggested Citation

Foley-Fisher, Nathan and Heinrich, Nathan and Verani, Stephane, Are US Life Insurers the New Shadow Banks? (September 10, 2021). Available at SSRN: https://ssrn.com/abstract=3534847 or http://dx.doi.org/10.2139/ssrn.3534847

Nathan Foley-Fisher

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Nathan Heinrich

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Stephane Verani (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/stephane-verani.htm

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