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Insurance activities and systemic risk

Elia Berdin and Matteo Sottocornolay

No 19/15, ICIR Working Paper Series from Goethe University Frankfurt, International Center for Insurance Regulation (ICIR)

Abstract: This paper investigates systemic risk in the insurance industry. We first analyze the systemic contribution of the insurance industry vis-a-vis other industries by applying 3 measures, namely the linear Granger causality test, conditional value at risk and marginal expected shortfall, on 3 groups, namely banks, insurers and non-financial companies listed in Europe over the last 14 years. We then analyze the determinants of the systemic risk contribution within the insurance industry by using balance sheet level data in a broader sample. Our evidence suggests that i) the insurance industry shows a persistent systemic relevance over time and plays a subordinate role in causing systemic risk compared to banks, and that ii) within the industry, those insurers which engage more in non-insurance-related activities tend to pose more systemic risk. In addition, we are among the first to provide empirical evidence on the role of diversification as potential determinant of systemic risk in the insurance industry. Finally, we confirm that size is also a significant driver of systemic risk, whereas price-to-book ratio and leverage display counterintuitive results.

Keywords: Systemic Risk; Insurance Activities; Systemically Important Financial Institutions (search for similar items in EconPapers)
JEL-codes: G01 G22 G28 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ias and nep-rmg
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:icirwp:1915

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