Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297332 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2892
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
The euro area insurance sector and its relevance for real economy financing have grown significantly over the last two decades. This paper analyses the effects of monetary policy on the size and composition of insurers' balance sheets, as well as the implications of these effects for financial stability. We find that changes in monetary policy have a significant impact on both sector size and risk-taking. Insurers' balance sheets grow materially after a monetary loosening, implying an increase of the sector's financial intermediation capacity and an active transmission of monetary policy through the insurance sector. We also find evidence of portfolio re-balancing consistent with the risk-taking channel of monetary policy. After a monetary loosening, insurers increase credit, liquidity and duration risk-taking in their asset portfolios. Our results suggest that extended periods of low interest rates lead to rising financial stability risks among non-bank financial intermediaries.
Subjects: 
Non-bank financial intermediation
monetary policy transmission
risk-taking
portfolio re-balancing
JEL: 
E52
G11
G22
G23
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6372-5
Document Type: 
Working Paper

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