Systemic Risk and Regulation of the U.S. Insurance Industry

Forthcoming, Journal of Risk and Insurance

52 Pages Posted: 26 Feb 2014

See all articles by J David Cummins

J David Cummins

Temple University - Risk Management & Insurance & Actuarial Science

Mary A. Weiss

Temple University

Multiple version iconThere are 2 versions of this paper

Date Written: February 24, 2014

Abstract

This chapter analyzes the characteristics of U.S. insurers for purposes of determining whether they are systemically risky. More specifically, primary indicators and contributing factors associated with systemic risk are assessed for the insurance sector. A distinction is made between the core activities of insurers (e.g., underwriting, reserving, claims settlement, etc.) and their non-core activities (such as providing financial guarantees). Statistical analysis of insurer characteristics and their relationship with a well-known systemic risk measure, SRISK, is provided. The core activities of property-casualty insurers are found not to be systemically risky. However, we find evidence that some core activities of life insurers, particularly separate accounts and group annuities, may be associated with systemic risk. The non-core activities of both types of insurers can contribute to systemic risk. The study also finds that insurers may be susceptible to intra-sector crises such as reinsurance crises arising from counterparty credit risk. New and proposed state and federal regulations are reviewed in light of the potential for systemic risk for this sector.

Keywords: insurance regulation, systemic risk, reinsurance, SRISK, systemically important financial institution, insurance insolvencies

JEL Classification: G21, G22

Suggested Citation

Cummins, J. David and Weiss, Mary A., Systemic Risk and Regulation of the U.S. Insurance Industry (February 24, 2014). Forthcoming, Journal of Risk and Insurance. Available at SSRN: https://ssrn.com/abstract=2400577 or http://dx.doi.org/10.2139/ssrn.2400577

J. David Cummins (Contact Author)

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1801 Liacouras Walk.
Philadelphia, PA 19122
United States
215-204-8468 (Phone)
215-204-4712 (Fax)

Mary A. Weiss

Temple University ( email )

Fox School of Business and Management
1801 Liacouras Walk
Philadelphia, PA 19122
United States
215-204-1916 (Phone)

HOME PAGE: http://www.sbm.temple.edu/~rmidept/weiss.html

Register to save articles to
your library

Register

Paper statistics

Downloads
216
Abstract Views
1,114
rank
51,995
PlumX Metrics