Systemic Risk in Financial Markets: How Systemically Important Are Insurers?

Kaserer, Christoph; Klein, Christian

doi:10.1111/jori.12236

Cited by 37 publications

(21 citation statements)

References 64 publications

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“…Our paper is one of the few quantitative studies on systemic risk in the European and global insurance sector. Although SR in in the financial sector is analyzed by: Bierth et al (2015), Mühlnickel and Weiß (2015), Kanno (2016), Giglio et al (2016), Adrian and Brunnermeier (2016), Koijen (2016), Brownlees (2017), Kaserer (2018) and risk infection is studied by Hautsch et al (2015), Härdle et al (2016), Fan et al (2018), nevertheless, none of these approaches is a hybrid approach in which the possibility of combining different measures would be analyzed on such a scale as proposed in our project.…”

Section: Systemic Risk In the Insurance Sectormentioning

confidence: 99%

A Tail Dependence-Based MST and Their Topological Indicators in Modeling Systemic Risk in the European Insurance Sector

Denkowska¹,

Wanat²

2020

Risks

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In the present work we analyse the dynamics of indirect connections between insurance companies that result from market price channels. In our analysis we assume that the stock quotations of insurance companies reflect market sentiments which constitute a very important systemic risk factor. Interlinkages between insurers and their dynamics have a direct impact on systemic risk contagion in the insurance sector. We propose herein a new hybrid approach to the analysis of interlinkages dynamics based on combining the copula-DCC-GARCH model and Minimum Spanning Trees (MST). Using the copula-DCC-GARCH model we determine the tail dependence coefficients. Then, for each analysed period we construct MST based on these coefficients. The dynamics is analysed by means of time series of selected topological indicators of the MSTs in the years 2005-2019. Our empirical results show the usefulness of the proposed approach to the analysis of systemic risk in the insurance sector. The times series obtained from the proposed hybrid approach reflect the phenomena occurring on the market. The analysed MST topological indicators can be considered as systemic risk predictors.

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Section: Systemic Risk In the Insurance Sectormentioning

confidence: 99%

A Tail Dependence-Based MST and Their Topological Indicators in Modeling Systemic Risk in the European Insurance Sector

Denkowska¹,

Wanat²

2020

Risks

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“…The relation expressed in this systemic risk model captures the market view of the rate at which declining asset values lead to equity falls when the market downfalls. It explicitly concentrates on interpreting the co-movement of this firm and the market, instead of serving as just a volatility measure of the firm’s stock (Brownlees and Engle, 2017; Christoph and Christian, 2017). This intuition makes the SRISK estimated in this study a macroprudential measure of risk initiated or propagated by bank M&A announcements, and a micro-prudential measure when SRISK is calculated per firm and when SRISK is examined beside Δ beta and Beta* in the previous section.…”

Section: Methodsmentioning

confidence: 99%

Bank mergers: the cyclical behaviour of regulation, risk and returns

Hassan

Giouvris

2021

JFEP

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Purpose The purpose of this paper is to examine the effects of bank mergers on systemic and systematic risks on the relative merits of product and market diversification strategies. It also observes determinants of M&A deals criteria, product and market diversification positioning, crisis threshold and other regulatory and market factors. Design/methodology/approach This research examines the impact and association between merger announcements and regulatory reforms at bank and system levels by investigating the impact of various bank consolidation strategies on firms’ risks. We estimate beta(s) as an index of financial institutions’ systematic risk. We then develop an index of the estimated equity value loss as the long-rum marginal expected shortfall (LRMES). LRMES contributes to compute systemic risk (SRISK) contribution of these firms, which is the capital that a firm is expected to need if we have another financial crisis. Findings Large acquiring banks decrease systemic risk contribution in cross-border M&As with a non-bank financial institution, and witness profitability (ROA) gains, supporting geographic diversification stability. Capital requirements, activity restrictions and bank concentration increase systemic risk contribution in national mergers. Bank mergers with investment FIs targets enhance productivity but impair technical efficiency, contrary to bank-real estate deals where technical efficiency change accompanied lower systemic risk contribution. Practical implications Financial institutions are recommended to avoid trapped capital and liquidity by efficiently using local balance sheet and strengthening them via implementing models that clearly set diversification and netting benefits to determine capital reserves and to drive capital efficiency through the clarity on product–activity–geography diversification and focus. This contributes to successful ringfencing, decreases compliance costs and maximises returns and minimises several risks including systemic risk. Social implications Policy implications: the adversative properties of bank mergers in respect of systemic risk require strict and innovative monitoring of bank mergers from the bidding level by both acquirers and targets and regulators and competition supervisory bodies. Moreover, emphasis on regulators/governments intervention and role, as it provides a stabilising factor of the markets and consecutively lower systemic risk even if the systematic idiosyncratic risk contribution was significant. However, such roles have to be well planned and scaled to avoid providing motives for banks to seek too-big-too-fail or too-big-to-discipline status. Originality/value This research contributes to the renewing regulatory debate on banks sustainable structures by examining the risk effect of bank diversification versus focus. The authors aim to address the multidimensional impacts and risks inherent to M&A deals, by examining the extent of the interconnectedness of M&A and its implications within and beyond the banking sector.

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“…The concept of risk and risk assessments has a long history since 400 BC when Athenians assess the risks before making decisions (Bernstein, 1996). However, these days the term “risk” being applied to several areas such as psychology (Breakwell, 2007; Cox, 2008), health care (Grundy et al , 1999; Littlejohn et al , 2014), finance (Smith, 2015; Kaserer and Klein, 2018), marketing (Chiambaretto et al , 2016; Kivenzor, 2015), management (Heckmann et al , 2015; Song et al , 2017; Mangla et al , 2018) and decision theory (Tuncel and Alpan, 2010; Liu et al , 2017).…”

Section: Literature Reviewmentioning

confidence: 99%

Risk management in Halal supply chain: an integrated fuzzy Delphi and DEMATEL approach

Khan

Haleem

Khan

2020

JM2

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Purpose In a globalised environment, market volatility makes risk management an essential component of the supply chain. Similar to conventional supply chains, a Halal supply chain (HSC) is also affected by several factors making it vulnerable to risks. Therefore, the purpose of this study is to identify and analyse the elements of Halal supply chain management (HSCM) and their significant risk dimensions. Design/methodology/approach In total, 72 risk elements of HSCM are identified through a review of contemporary scientific literature along with news items and official websites related to risk management of conventional supply chain management, HSC and sustainable supply chain. Further, 42 risk elements are finalised using fuzzy Delphi and then these risk elements are categorised into 7 dimensions. The interrelationships among the risk dimensions as well as risk elements are developed using fuzzy DEMATEL. Findings Results suggest that production, planning, logistic & outsourcing and information technology-related risk are prominent risk dimensions. The causal relationships among the significant risk dimensions and elements related to the HSCM may help managers and policy planners. Research limitations/implications This study faces a challenge due to inadequate availability of the literature related to risk management in the area of HSCM. Further, this study has used inputs from experts, which can be biased. Originality/value To the best of the author's knowledge, it is the first comprehensive study towards investigating the interrelationships among the risks in the context of the HSCM.

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Systemic Risk in Financial Markets: How Systemically Important Are Insurers?

Cited by 37 publications

References 64 publications

A Tail Dependence-Based MST and Their Topological Indicators in Modeling Systemic Risk in the European Insurance Sector

A Tail Dependence-Based MST and Their Topological Indicators in Modeling Systemic Risk in the European Insurance Sector

Bank mergers: the cyclical behaviour of regulation, risk and returns

Risk management in Halal supply chain: an integrated fuzzy Delphi and DEMATEL approach

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