Risk management metrics in insurance market lead to increased insolvency risk.
The study looked at how using risk management metrics like Value-at-Risk (VaR) in insurance can affect the market. They found that while VaR requirements can protect policyholders and make insurance more efficient, they can also harm the insurance market by increasing insolvency risk for insurers and creating moral hazard issues. In simple terms, having VaR requirements can make insurance better for customers but can also make the market more unstable.