Government Intervention through an Implicit Federal Backstop: Is There a Link to Market Power?

  • David L Eckles
  • James I Hilliard
Original Article


We estimate the impact of exogenous capital shocks, namely the Troubled Asset Relief Program (TARP), on prices in various property-casualty business lines. We hypothesise that these capital shocks may distort insurer incentives. Specifically, insurers may exploit the implicit governmental guaranty by taking additional pricing risks in order to gain market share. Our results do not support this hypothesis. We find no evidence of a company-specific, or industry-wide, moral hazard problem associated with the implicit (explicit, in some cases) federal backstop created by TARP funds.


moral hazard financial crisis insurer pricing insurer competition 


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Copyright information

© The International Association for the Study of Insurance Economics 2015

Authors and Affiliations

  • David L Eckles
    • 1
  • James I Hilliard
    • 2
  1. 1.Insurance, Legal Studies and Real Estate, University of GeorgiaAthensU.S.A.
  2. 2.W.A. Franke College of Business, Northern Arizona UniversityU.S.A.

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