Capital, aggregate risk, insurance prices and regulation

•A general equilibrium model of competitive insurance and equity capital markets shows how aggregate risks affect insurance prices and regulation.•We implement the efficient allocation via risk-based capital requirements, asset risk constraints, reinsurance and bailouts.•A lower capital requirement links to a tighter asset risk constraint. A more asset-sensitive capital requirement is less sensitive to liabilities.•Insurees are fully insured in the optimally regulated economy when aggregate risk is low, but bear aggregate risk when it is high.•The efficient policies do not vary when aggregate risk is low, but capital and asset risk constraints are tighter as it increases above a threshold.