Life Insurance and Annuity Pricing during the Financial Crisis, Revisited

We reexamine life insurance and annuity pricing during the 2008 financial crisis. In contrast with previous research, we find that insurers sold policies at significantly elevated markups over their fundamental values during the crisis months and, moreover, that statutory accounting pressures had the effect of increasing rather than decreasing prices. We show that the experience in 2008 was not extraordinary but instead mirrored earlier episodes where corporate borrowing rates rose quickly, such as 1994 and 1999.