Why Do Some Insurers become Systemically Relevant?

69 Pages Posted: 30 Jun 2013 Last revised: 6 May 2014

See all articles by Gregor N. F. Weiss

Gregor N. F. Weiss

University of Leipzig - Faculty of Economics and Management Science

Janina Muhlnickel

Technical University of Dortmund

Date Written: May 6, 2014

Abstract

Are some insurers relevant for the stability of the financial system? And if yes, what firm fundamentals and aspects of insurers' business models cause them to destabilize an entire financial sector? We find that several insurers did indeed contribute significantly to the instability of the U.S. financial sector during the recent financial crisis. We empirically confirm that insurers that were most exposed to systemic risk were larger, relied more heavily on non-policyholder liabilities and had higher ratios of investment income to net revenues on average. Contrary to current conjectures of insurance regulators, we find that the contribution of insurers to systemic risk is only driven by insurer size.

Keywords: Financial Crises, Insurance Industry, Systemic Risk

JEL Classification: G22, G01, G34

Suggested Citation

Weiss, Gregor N. F. and Muhlnickel, Janina, Why Do Some Insurers become Systemically Relevant? (May 6, 2014). Journal of Financial Stability, Forthcoming, 26th Australasian Finance and Banking Conference 2013, Available at SSRN: https://ssrn.com/abstract=2214005 or http://dx.doi.org/10.2139/ssrn.2214005

Gregor N. F. Weiss (Contact Author)

University of Leipzig - Faculty of Economics and Management Science ( email )

Grimmaische Str. 12
Leipzig, 04109
Germany
+49 341 97 33821 (Phone)
+49 341 97 33829 (Fax)

HOME PAGE: http://www.wifa.uni-leipzig.de/nfdl

Janina Muhlnickel

Technical University of Dortmund ( email )

Emil-Figge-Straße 50
Dortmund, 44227
Germany

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