Insurance Activities and Systemic Risk

48 Pages Posted: 10 Jun 2015 Last revised: 7 Dec 2015

See all articles by Elia Berdin

Elia Berdin

Generali & International Center for Insurance Regulation

Matteo Sottocornola

Goethe University Frankfurt - Research Center SAFE; EIOPA

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2015

Abstract

This paper investigates systemic risk in the insurance industry. We first analyze the systemic contribution of the insurance industry vis-à-vis other industries by applying 3 measures, namely the linear Granger causality test, conditional value at risk and marginal expected shortfall, to 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, SIFI

JEL Classification: G01, G22, G28, G32

Suggested Citation

Berdin, Elia and Sottocornola, Matteo, Insurance Activities and Systemic Risk (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=2616210 or http://dx.doi.org/10.2139/ssrn.2616210

Elia Berdin

Generali & International Center for Insurance Regulation ( email )

Milan
Italy

HOME PAGE: http://www.icir.de

Matteo Sottocornola (Contact Author)

Goethe University Frankfurt - Research Center SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

EIOPA ( email )

Westhafenplatz 1
Frankfurt am Main, 60327
Germany

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