An Analysis of Systemic Risk in the Insurance Sector – Evidence from Asia-Pacific Region

Kanno Masayasu ()
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Kanno Masayasu: Faculty of Business Administration, Kanagawa University, Tsuchiya, Hiratsuka, Kanagawa, Japan

Asia-Pacific Journal of Risk and Insurance, 2014, vol. 8, issue 2, 149-178

Abstract: This study contributes to the assessment of systemic risk for the insurance sector. We conducted two types of model approaches and scrutinized each insurer’s marginal systemic risk contribution to the entire Asia-Pacific insurance sector during the global financial crisis and thereafter. We applied the hypothetical distress insurance premium as a systemic risk measure by considering the “policyholder protection scheme” of each country and then incorporating the dynamic conditional correlation as the time-dependent, heterogeneous correlation parameter in the premium. Ping An Insurance (Group) Co. of China was only group in the Asia-Pacific region to be selected as a Globally Systemically Important Insurer (G-SII) in July 2013. Ping An Insurance was ranked first based on the marginal contribution of each insurer during the global financial crisis, and thereafter it was also ranked first based on recent data; therefore, we validated the G-SII’s selection. We propose these model approaches to be used in a mutually complementary manner as selection approaches for G-SIIs and risk management tools for insurers.

Keywords: systemic risk; structural model approach of credit risk; distress insurance premium; dynamic conditional correlation; policyholder protection scheme (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1515/apjri-2013-0021

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