Final answer:
Both the insured losses from 9/11 and the investment returns on the day Lehman Brothers collapsed are examples of capital shocks for insurers, affecting their capital reserves and leading to a shift in the demand for financial capital during the Great Recession.
Step-by-step explanation:
An example of a capital shock for insurers would be both insured losses on 09/11/2001 and the investment returns on 09/15/2008 when Lehman Brothers collapsed. The destruction caused by the 9/11 attacks resulted in massive claims against insurers, substantially impacting their capital and operations.
Additionally, the collapse of Lehman Brothers marked a significant financial crisis, leading to a drastic shift in the demand for financial capital among businesses and impacting the investment portfolios of insurance companies.
During the Great Recession of 2008 and 2009, businesses faced declining confidence and their demand for financial capital at any given interest rate shifted to the left. The bankruptcy of Lehman Brothers and the subsequent financial panic, along with fraudulent schemes like the Madoff pyramid scheme, created an environment where insurers had significant difficulties with investment returns, further straining their capital reserves.