Abstract
Firms that have losses are expected to sell tax-free securities and replace them with taxable securities since they can no longer benefit from tax savings. However, after the most recent financial crisis, firms’ decisions to rebalance their investment portfolios may have led to additional losses during a period of stressed financial performance and increased insurance regulation. This study examines portfolio allocation behaviour in the property and casualty insurance industry. The results show that investment limitations imposed by insurance regulators can inhibit desired investment allocation post the financial crisis.
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