Book excerpt: ABSTRACT: In addition to consumer decision-making, I also examine decision-making from the perspective of the insurer. Separate streams of empirical research suggest that firms may make adjustments toward a target capital structure, and that active internal capital markets (ICMs) exist within a variety of industries. While evidence supports the existence of targeting behavior on behalf of firm management and the existence of ICMs, no studies have examined how deviations from target capital structure relate to the use of ICMs. Based on a sample of affiliated property-casualty insurance companies and three commonly used measures of leverage, this study provides the first evidence of a link between deviations from target leverage and ICM activity. The findings suggest that affiliated property-casualty insurers do have target leverage ratios and that ICM activity is related to deviations from target leverage, where overleveraged insurers tend to cede more internal reinsurance and underleveraged insurers tend to cede less internal reinsurance.