Early warning system for the European Insurance Sector

Lorenzo Danieli and Petr Jakubík

No 13, EIOPA Financial Stability Report - Thematic Articles from EIOPA, Risks and Financial Stability Department

Abstract: This article proposes an Early Warning System model composed of macro-financial and company-specific indicators that could help to anticipate a potential market distress in the European insurance sector. A distress is defined as periods in which insurance companies’ equity prices crash and CDS spreads spike simultaneously. The model is estimated using a sample of 43 insurance companies that are listed. Based on a panel binomial logit specification, empirical evidence shows that economic overheating that could be manifested by high economic growth and inflation as well as high interest rates have negative impact on insurance sector stability. At the company level, increasing operating expenses increase the likelihood of distress occurrence.

Keywords: early warning system; insurance sector; financial distress (search for similar items in EconPapers)
JEL-codes: E44 G01 G12 G22 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2018-12
New Economics Papers: this item is included in nep-ias, nep-mac and nep-rmg
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Published in Financial Stability Report, EIOPA, December 2018, pages 74-83

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Journal Article: Early Warning System for the European Insurance Sector (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eio:thafsr:13

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