Regulatory Free Cash Flow and the High Cost of Insurance Company Failures

@inproceedings{Hall1998RegulatoryFC,
  title={Regulatory Free Cash Flow and the High Cost of Insurance Company Failures},
  author={Brian J. Hall},
  year={1998}
}
Why is the cost of resolving insurance company failures so high? Evidence in this paper suggests that the state insurance regulatory bodies in charge of the liquidation process turn over an average of only 33 cents for each $1.00 of pre-insolvency assets to the guaranty funds (the state agencies responsible for paying claims). This very low ex ante regulatory failure -- the assets of the company are not worth much, reflecting regulatory problems prior to liquidation. Or the low recovery rate… CONTINUE READING

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