Persistence of insurance activities and financial stability

Christian Kubitza and Fabian Regele

No 30/17, ICIR Working Paper Series from Goethe University Frankfurt, International Center for Insurance Regulation (ICIR)

Abstract: Different insurance activities exhibit different levels of persistence of shocks and volatility. For example, life insurance is typically more persistent but less volatile than non-life insurance. We examine how diversification among life, non-life insurance, and active reinsurance business affects an insurer's contribution and exposure to the risk of other companies. Our model shows that a counterparty's credit risk exposure to an insurance group substantially depends on the relative proportion of the insurance group's life and non-life business. The empirical analysis confirms this finding with respect to several measures for spillover risk. The optimal proportion of life business that minimizes spillover risk decreases with leverage of the insurance group, and increases with active reinsurance business.

Keywords: Insurance Companies; Financial Stability; Persistence (search for similar items in EconPapers)
JEL-codes: G01 G22 G23 G28 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ias and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:icirwp:3017

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