Why Do Some Insurers Become Systemically Relevant?

Weiß, Gregor N. F.; Mühlnickel, Janina

doi:10.2139/ssrn.2214005

Cited by 6 publications

(2 citation statements)

References 61 publications

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“…Therefore, it has become a first-order priority to understand not only how insurance companies contribute to systemic risk of the overall financial sector but also when and why they have increased their systemic exposure and their systemic contribution. The literature identifies the main drivers of risk in the growth of non-traditional funding and non-traditional investment activities (Cummins and Weiss, 2014; Weiss and Mühlnickel, 2014)[2]. Moreover, insurance companies and banks are becoming more and more interconnected (Cummins and Boettner, 2011; Chen et al , 2013, Billio et al , 2011) as the insurers business models are rapidly changing, and their returns are comoving more with banks returns.…”

Section: Introductionmentioning

confidence: 99%

Capital regulation and systemic risk in the insurance sector

Gehrig

Iannino

2018

JFEP

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This paper analyses systemic risk in and the effect of capital regulation on the European insurance sector. In particular, the evolution of an exposure measure (SRISK) and a contribution measure (Delta CoVaR) are analyzed from 1985 to 2016. With the help of multivariate regressions the main drivers of systemic risk are identified. The paper finds an increasing degree of interconnectedness between banks and insurance that correlates with systemic risk exposure. Interconnectedness peaks during periods of crisis but has a long-term influence also during normal times. Moreover, the paper finds that the insurance sector was greatly affected by spillovers from the process of capital regulation in banking. While European insurance companies initially at the start of the Basel process of capital regulation were well capitalized according to the SRISK measure, they started to become capital deficient after the implementation of the model-based approach in banking with increasing speed thereafter.These findings are highly relevant for the ongoing global process of capital regulation in the insurance sector and potential reforms of Solvency II. Systemic risk is a leading threat to the stability of the global financial system and keeping it under control is a main challenge for policy makers and supervisors. This paper provides novel tools for supervisors to monitor risk exposures in the insurance sector while taking into account systemic feedback from the financial system and the banking sector in particular. These tools also allow an evidence based policy evaluation of regulatory measures such as Solvency II.

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Section: Introductionmentioning

confidence: 99%

Capital regulation and systemic risk in the insurance sector

Gehrig

Iannino

2018

JFEP

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“…The latter reference analyzes the ability of the insurance industry to disrupt the financial market. It is indeed observed that insurers may contribute to the instability of the financial sector, especially through their noncore activities, see [7][8][9][10][11]. These observations are based on systemic risk measures that allow for the study of the interconnectedness between insurers and other financial institutions, see [12][13][14].…”

Section: Introductionmentioning

confidence: 99%

Macroprudential Insurance Regulation: A Swiss Case Study

Deprez

Wüthrich

2016

Risks

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Abstract:This article provides a case study that analyzes national macroprudential insurance regulation in Switzerland. We consider an insurance market that is based on data from the Swiss private insurance industry. We stress this market with several scenarios related to financial and insurance risks, and we analyze the resulting risk capitals of the insurance companies. This stress-test analysis provides insights into the vulnerability of the Swiss private insurance sector to different risks and shocks.

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