Download this Paper Open PDF in Browser

Insurance Activities and Systemic Risk

SAFE Working Paper No. 121

51 Pages Posted: 11 Dec 2015  

Elia Berdin

Generali & International Center for Insurance Regulation

Matteo Sottocornola

Goethe University Frankfurt - Research Center SAFE

Multiple version iconThere are 2 versions of this paper

Date Written: December 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, 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

JEL Classification: G01, G22, G28, G32

Suggested Citation

Berdin, Elia and Sottocornola, Matteo, Insurance Activities and Systemic Risk (December 2015). SAFE Working Paper No. 121. Available at SSRN: https://ssrn.com/abstract=2701821 or http://dx.doi.org/10.2139/ssrn.2701821

Elia Berdin (Contact Author)

Generali & International Center for Insurance Regulation ( email )

Milan
Italy

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

Matteo Sottocornola

Goethe University Frankfurt - Research Center SAFE ( email )

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

Paper statistics

Downloads
165
Rank
113,605
Abstract Views
638