This paper is the first that formally compares investment risk taking by pensionfunds and insurance firms. Using a unique and extended dataset that covers thevolatile investment period 1995-2009, we find that, in the Netherlands, insurerstake substantially less investment risk than pension funds, even though a marketrisk capital charge for insurers is yet absent. This result can be explained fromfinancial distress costs, which only insurers face. We also find that institutionalinvestors’ risk taking is determined by their risk bearing capacity, where this riskbearing capacity depends on capital, size, reinsurance, underwriting risk and humanand financial wealth per pension plan participant. Finally, and in line with theownership structure hypothesis, stock insurers are found to take significantly moreinvestment risk than mutual insurers.