Systemic Risk in the Insurance Sector: A Review and Directions for Future Research

Eling, Martin; Pankoke, David Antonius

doi:10.1111/rmir.12062

Cited by 29 publications

(17 citation statements)

References 73 publications

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“…On the one hand, the often cited problems of moral hazard and adverse selection describing the asymmetric information between the principal (e.g., insurance agency) and the agent (e.g., farmer), as well as the systemic character of several agricultural risks, such as drought or flooding in vulnerable areas, pose a high insolvency risk for local operating insurance agencies. Furthermore, non-traditional activities such as financial derivatives and guarantees have the potential to increase systemic risks of the insurance industry [12,13]. On the other hand, the policyholder's attitude and obstacles, such as limited resources, bureaucracy or problems regarding damage payments, are factors that reduce the demand for agricultural insurances [14].…”

Section: Insurance Markets and Agricultural State Supportmentioning

confidence: 99%

Resilience through the Financialisation of Risks? The Case of a Dairy System in Northwest Germany

Popp

Nowack

2020

Sustainability

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State support for financial risk management schemes has been introduced in numerous agricultural policies to enhance farming system resilience in response to increased income fluctuations and partially reduced producer support levels in the agricultural sector. In order to better understand how financialisation of risks can contribute to an actual improvement of specific farming systems’ resilience, this study investigates its effects with regards to dairy farming. Based on an in-depth case study of a dairy system in Northwest Germany, multilayered challenges faced by the farm system are identified, resilience strategies investigated and the role of financial risk management evaluated. In doing so, the resilience assessment framework developed by Meuwissen et al. (2019) is applied in order to analyse the systems’ capacity to resist, adapt or transform in response to external challenges threatening the provision of system’ functions. The results indicate a high relevance of insurances and savings with regards to the system’s robustness against short-term shocks. However, to address the various long-term pressures, resilience-enhancing attributes that increase the system’s capacity to adapt and transform would need to be strengthened. In particular, more cooperation and knowledge transfer beyond system boundaries could contribute to a holistic risk management allowing for improved farming system resilience.

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Section: Insurance Markets and Agricultural State Supportmentioning

confidence: 99%

Resilience through the Financialisation of Risks? The Case of a Dairy System in Northwest Germany

Popp

Nowack

2020

Sustainability

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“…To frame the analysis in the main part of our article, we briefly review this literature below. For a comprehensive survey of the existing literature on systemic risk in insurance, see Eling and Pankoke ().…”

Section: Related Literaturementioning

confidence: 99%

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

Kaserer¹,

Klein²

2018

J of Risk & Insurance

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This study investigates how insurers contribute to systemic risk in the global financial system. In a modeling framework embracing publicly traded and nonpublic firms, the financial system is represented by 201 major banks and insurers over the period from 2004 through 2014. In the aggregate, the insurance sector contributes relatively little to systemic losses; during the financial crisis and the European sovereign debt crisis, its risk share averaged 9 percent. Individually, however, several multi‐line and life insurers appear to be as systemically risky as the riskiest banks. Our results, therefore, affirm that some insurers are systemically important and indicate that insurers’ level of systemic risk varies by line of business. We discuss several important implications of our results for managing systemic risk in insurance, arguing for a combination of entity‐ and activity‐based regulation.

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“…In this section we discuss and review the existing literature on systemic risk in the insurance sector, a topic of great importance for researchers and regulators. There is a common agreement in the literature that non-traditional and non-insurance activities do appear to be relevant to systemic risk (Eling et al, 2016). In accordance with Eling et al, the International Association of Insurance Supervisors (IAIS, 2011) also reports that non-traditional and non-insurance activities such as securities lending businesses among others can contribute to systemic risk.…”

Section: Literature Reviewmentioning

confidence: 85%

Modeling System Risk in the South African Insurance sector: A Dynamic Mixture Copula Approach

Mwamba¹,

Angaman²

2021

Preprint

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In this study, a dynamic mixture copula is used to estimate the marginal expected shortfall in the South African insurance sector. While other studies assumed nonlinear dependence to be static over time, our model capture time-varying nonlinear dependence between institutions and the market. In order to capture time-varying nonlinear dependence, the generalized autoregressive score (GAS) is used to model the dynamic copula parameters. Furthermore, our study implements a ranking that expresses to what degree individual insurers are systemically important in South Africa. We use daily stock return of five South African insurers listed in the Johannesburg Stock Exchange (JSE) from November 13, 2007 to June 15, 2020. We find that Sanlam and Discovery contribute the most to systemic risk, while Santam is found to be the least contributor to the overall systemic risk in the South African insurance sector. Our findings would be of paramount importance for the South African regulators as they would be informed that not only banks are systemically important, but some insurers also are systemically important financial institutions. Hence, stricter regulation of these institutions in the form of higher capital and loss absorbency requirements could be required based on the individual business activities undertaken by the company.

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Systemic Risk in the Insurance Sector: A Review and Directions for Future Research

Cited by 29 publications

References 73 publications

Resilience through the Financialisation of Risks? The Case of a Dairy System in Northwest Germany

Resilience through the Financialisation of Risks? The Case of a Dairy System in Northwest Germany

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

Modeling System Risk in the South African Insurance sector: A Dynamic Mixture Copula Approach

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