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Although much research has been published on the convergence of insurance and capital markets, few researchers have explored the interrelation between capital market and insurance cycles, i.e., the covariation between (excess) capital and the supply of insurance capacity. The article focuses, in particular, on how investment returns restricted capital outflow and thus impaired the influence of capital market discipline on property and casualty over‐capacity during the mid‐1990s. The authors also discuss how certain risk convergence products develop or evolve in response to the insurance cycles. |
