Systemic Risk and the Insurance Industry

Eling, Martin; Pankoke, David Antonius

doi:10.1057/9781137439109.0011

Cited by 1 publication

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“…Adrian and Shin, 2010) and insurance (e.g. Eling and Pankoke, 2013), may also apply to pension funds, as discussed by Amzallag et al (2014) and Severinson and Yermo (2010;. As asset prices increase the market value of the funds' assets increase, thus making the capital requirements become less binding and allowing the funds to take on more risks.…”

Section: Regulation Changesmentioning

confidence: 99%

Pension funds: conceptions of risk and the demand for ‘alternatives’

Bonizzi

Churchill

2017

REM

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The expansion and innovation of financial markets is closely linked to the growth of pension funds. While the conventional narrative is based on the notion of financial development as a positive change, this paper argues that pension funds may induce demand-led pressures on the financial system, generating potential for systemic risk and instability. The rise of pension funds is therefore important for the process of financialisation, as these institutions’ demand for assets continuously sparks growth and innovation in financial markets. In the current context pension funds are attempting to reduce risk by rebalancing their allocations away from equities towards ‘alternatives’, such as hedge funds and private equity. Coupled with the current regulatory trends towards risk-based funding regulation, we argue that pension funds are unlikely to be a stabilising force in financial markets today.

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Section: Regulation Changesmentioning

confidence: 99%