Systemic Risk and the U.S. Insurance Sector

40 Pages Posted: 20 Aug 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: September 2014

Abstract

This article examines the potential for the U.S. insurance industry to cause systemic risk events that spill over to other segments of the economy. We examine primary indicators of systemic risk as well as contributing factors that exacerbate vulnerability to systemic events. Evaluation of systemic risk is based on a detailed financial analysis of the insurance industry, its role in the economy, and the interconnectedness of insurers. The primary conclusion is that the core activities of U.S. insurers do not pose systemic risk. However, life insurers are vulnerable to intrasector crises, and both life and property–casualty insurers are vulnerable to reinsurance crises. Noncore activities such as financial guarantees and derivatives trading may cause systemic risk, and interconnectedness among financial institutions has grown significantly in recent years. To reduce systemic risk from noncore activities, regulators need to continue efforts to strengthen mechanisms for insurance group supervision.

Suggested Citation

Cummins, J. David and Weiss, Mary A., Systemic Risk and the U.S. Insurance Sector (September 2014). Journal of Risk and Insurance, Vol. 81, Issue 3, pp. 489-528, 2014. Available at SSRN: https://ssrn.com/abstract=2483534 or http://dx.doi.org/10.1111/jori.12039

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

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