Systemic Risk in Financial Markets: How Systemically Important Are Insurers?

62 Pages Posted: 4 Jun 2016 Last revised: 26 Sep 2018

See all articles by Christoph Kaserer

Christoph Kaserer

Technische Universität München (TUM)

Christian Klein

Technische Universität München (TUM)

Date Written: January 11, 2017

Abstract

We study how insurers contribute to systemic risk in financial markets. Systemic risk is measured as the market value of distressed losses to financial institutions' creditors, and in terms of tail interdependence between individual financial institutions and the broader financial system. The global financial system is represented by 183 major banks and insurers over the pre-crisis and crisis periods from January 2005 through December 2014. On the sector level, we find that the insurance sector generally contributes relatively little to the aggregate amount of systemic risk in the global financial system; during the financial crisis and the European sovereign debt crisis, its systemic risk share averaged 9 percent. On the level of individual institutions, however, several multi-line and life insurers appear as systemically risky as the riskiest banks. Our results indicate that insurers' level of systemic risk varies by line of business, and provide a preliminary affirmation that some insurers are systemically important financial institutions. We discuss several important implications for the regulation of systemic risk in financial markets.

Keywords: financial crisis, European sovereign debt crisis, systemic risk, global systemically important insurer, credit default swap

JEL Classification: G01, G17, G21, G22, G28

Suggested Citation

Kaserer, Christoph and Klein, Christian, Systemic Risk in Financial Markets: How Systemically Important Are Insurers? (January 11, 2017). Available at SSRN: https://ssrn.com/abstract=2786947 or http://dx.doi.org/10.2139/ssrn.2786947

Christoph Kaserer

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25489 (Phone)
+49 89 289 25488 (Fax)

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

Christian Klein (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, 80333
Germany

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