TITLE
"Financial Services Modernization Act of 1999: Market Assessment of Winners and Losers in the Insurance Industry," Journal of Insurance Issues, Abdullah Al Mamun, M. Kabir Hassan, Gordon V. Karels, and Neal Maroney, Spring 2005, Vol. 28, No. 1, pp. 103-128. Full-text articles soon will be available through ABI/INFORM and EBSCO; click here for article PDF. 

ABSTRACT
The Financial Services Modernization Act of 1999 repeals the Depression-era
Glass-Steagall Act (1933) and the Bank Holding Company Act (1956) and allows
insurance firms for the first time to merge with banks and cross sell non-traditional
insurance products. Previous studies suggest that such an opportunity will lead to
consolidation in the financial services industry. In this study we investigate whether
the FSMA will lead to mergers between insurance companies and other firms in the
financial services industry by analyzing the announcements leading to the FSMA. Our
study shows that relaxation of merger barriers creates a wealth effect for firms in the
industry. We also find a larger wealth effect for life and property/casualty insurers,
which are predicted to generate the highest diversification benefit when combined with
bank holding companies. Cross-industry merger opportunities and regulatory changes
also reduce the systematic risk of firms in the insurance industry. The cross-sectional
variation of the wealth effect can be explained by the type of insurance, size, and
performance as well as the diversification benefit. As predicted by merger literature,
larger and poorly performing firms a have higher wealth effect.

[Keywords: insurance industry, wealth effects, Financial Modernization Act, cross-industry merger, systematic risk].