Essays in Financial Economics

Abstract

This dissertation examines the role of insurance companies in financial markets and their implications for financial stability and monetary policy transmission. Insurance companies, which are among the largest financial intermediaries, directly connect households and financial markets through their investments in bonds, stocks, and other assets, exposing them to financial risks and creating potential contagion channels during crises. The three self-contained essays in this dissertation address key aspects of insurers' interactions with financial markets. The first chapter explores insurers' interlinkage with other financial institutions created by insurers' bond investments, yielding evidence that insurers value financial institutions' role in diversifying idiosyncratic risks. The second chapter, joint work with Christian Kubitza and Jakob Ahm Sørensen, investigates how monetary policy impacts insurance markets and, subsequently, housing and mortgage markets, revealing a novel transmission channel through price adjustments driven by regulatory frictions. The third chapter, joint work with Marcel Brambeer, analyzes how institutional investors' corporate bond demand spills over to loan markets, emphasizing the role of investor composition in shaping firms' funding responses to monetary policy. Together, these studies provide insights into insurers' pivotal role in financial systems and their impact on economic outcomes.