The Pros And Cons Of Shadow Insurance

Summary statistics reported by the Federal Reserve staff report on shadow insurance, which can be found Table I, highlight differences between life insurers not using shadow insurance and those that are (Koijen & Yogo, 2016). While there were far more insurers not using shadow insurance than those that did in 2012, 443 and 78, respectively, those using shadow insurance had 48 percent of the market share in both life insurance and annuities. Liabilities of those using shadow insurance were 317 percent more and current liquidity was 78 percent less than those not using shadow insurance. Even with greater liabilities and less liquidity, A.M. Best, the main rating agency for insurance companies, on average gave life insurers using shadow insurance