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Faculty News March 29, 2023

A Q&A with Chicago Booth’s Koijen, Princeton’s Yogo on teaching the modern insurance sector

Over the last twenty years, Chicago Booth’s Ralph S.J. Koijen and Princeton’s Motohiro Yogo have both emerged as leading experts in the fields of asset pricing, insurance, and other aspects of financial economics. 

In addition to publishing dozens of top academic articles together, the two professors have taught at some of the most competitive Ph.D. and MBA programs in the United States and Europe, including Wharton, the London Business School, NYU’s Stern School of Business, and of course their home institutions of Princeton and Chicago Booth.

Now, Koijen and Yogo have combined their decades of knowledge into a new foundational textbook for graduate students and other experts. “Financial Economics of Insurance” will be published by Princeton University Press in April 2023. 

The new volume, which covers a broad range of topics–including insurance pricing, contract design, reinsurance, portfolio choice, and risk management–provides a unified framework for studying the impact of financial and regulatory frictions, as well as imperfect competition on all insurer decisions.

Here, the authors answer a few questions about why they decided to compile the volume and how the book’s contents can enhance graduate learning.

Graduate students and faculty can learn more about the book on the Princeton Press website and find related teaching materials prepared by the authors here. The book’s introduction is also available to read online.

Q: Why did you decide to publish a textbook? Was there something missing in other available volumes?

Yogo: Graduate students could read our published papers, but they would not necessarily see how they fit together in a cohesive view of the modern insurance sector. We also wanted to put together our research in a package that would be helpful to policymakers who regulate and think about the insurance sector. 

Q: The insurance sector has changed considerably over the two decades or so. How does this book address some of the big changes in the sector and prepare students to understand and study emerging issues?

Koijen: Traditionally, insurance companies insure idiosyncratic risks associated with life and health risks via annuities, life insurance, and health insurance. Modern insurance companies increasingly offer products that insure market risks, which is a response to a decline of private defined benefit pension plans and government plans. Also, insurers also use new capital and risk management tools, such as derivatives and off-balance sheet reinsurance. Our book provides a unified framework to analyze, both empirically and theoretically, all aspects of modern insurance markets, including the implications for financial stability. 

Q: What courses do you expect will benefit the most from the book?

Yogo: Instructors can cover parts of the book in a masters or PhD course on asset pricing, corporate finance, industrial organization, or public economics. We make the teaching slides available at

Q: Looking outside the MBA or Ph.D. classroom, what parts of the book might be most useful to economists or others working in policy or the private sector?

Koijen: The regulatory framework needs to evolve in response to the changes in the modern insurance sector. Our book provides policymakers and regulators both the conceptual insights and perspectives needed to design sound solvency regulations, and the quantitative tools to assess the impact of potential regulatory changes. 

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