This paper is an historical study—with implications for the present—of the extent to which the life insurance industry contributed to systemic risk prior to the 2008 financial crisis by using derivatives to hedge product and asset risks. First, we present evidence that the life insurance industry insufficiently appreciated the risks of variable annuities with guaranteed benefits (VAGB) in the run-up to the 2008 crisis. With USD 1.6 trillion in contracts under guarantees, VAGB had become a vast and lucrative part of life insurer activities. But the guarantees expose insurers to market risk. Our analysis suggests that those risks were insufficiently hedged. Second, we assess the cumulative magnitude of all derivative risks (including VAGB risks) and find that they probably do not rise to level of a systemic threat. As part of our analysis, we introduce a new methodology for assessing the diversification of life insurers, both individually and as an industry, with respect to their counterparties (banks) in derivative hedging. We find that the life insurance industry was relatively diversified. Our contribution is three-fold: First, we demonstrate the possibility of endemic misperception of risk within a financial sector. Second, we provide a new quantitative tool to assess the potential for the contagion of risk to spread from guarantors (banks) of life insurer derivative hedges to the life insurance sector by failure of the guarantors to perform. The 2008 crisis period provides a unique laboratory to test this and other theories of risk behavior. Third, we add to the discussion of Systemically Important Financial Institutions (SIFIs).

中文翻译：

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通过在2008年金融危机之前使用衍生品对冲，美国人寿保险业是否存在系统性风险的危险？

本文是一项历史研究，对人寿保险业在2008年金融危机之前通过使用衍生工具对冲产品和资产风险对系统性风险的贡献程度，对当前具有一定的影响。首先，我们提供的证据表明，在2008年金融危机爆发之前，人寿保险业没有充分意识到具有保证收益的可变年金的风险（VAGB）。VAGB拥有1.6万亿美元的担保合同，已成为寿险公司活动中一个庞大而有利可图的部分。但是这些担保使保险公司面临市场风险。我们的分析表明，这些风险没有得到足够的对冲。其次，我们评估了所有衍生风险（包括VAGB风险）的累积量，发现它们可能没有上升到系统性威胁的水平。作为我们分析的一部分，我们引入了一种新的方法来评估寿险公司在衍生品对冲中的交易对手（银行）的个体和整个行业的多元化。我们发现，人寿保险业相对多元化。我们的贡献是三方面的：首先，我们证明了金融部门中普遍存在的风险误解的可能性。其次，我们提供了一种新的量化工具，以评估由于担保人未能履行义务而将风险传染从人寿保险衍生品对冲的担保人（银行）传播至人寿保险部门的可能性。2008年危机时期提供了一个独特的实验室来测试这种风险行为理论和其他理论。第三，我们增加了对系统重要性金融机构（SIFI）的讨论。