Portability of deposits and policies: Why do banks react differently from insurers?
We investigate why some banks (insurers) resist an obligatory portability increase in deposits (insurance policies) whereas others embrace it. To this end, we model the impact of portability on the profitability of banks and insurers conditioned on the entity initial solvency level. Our model suggests that mandated portability increase benefits banks (insurers) with an above-benchmark (below-benchmark) initial solvency level benefit, while hurting the rest. We thus demonstrate that the difference in business models between banks and insurers is of considerable relevance for assessing the impact of uniform regulation on their respective profitability – and hence their stance with regard to that regulation.