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In an article recently published in Economic Perspectives, Kyal Berends, Robert McMenamin, Thanases Plestis, and Richard J. Rosen of the Economic Research Department at the Federal Reserve Bank of Chicago examined the interest rate risk of life insurers by estimating the sensitivity of their stock returns to changes in the return on bonds over a time frame that included a relatively calm period before the recent financial crisis, the financial crisis itself, and the recent period of low interest rates. The authors found that when bonds increased in value (that is, when interest rates fell), stocks of large insurance firms decreased in value more than those of their smaller counterparts.

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