Systemic Risk in the Insurance Sector: A Review and Directions for Future Research

36 Pages Posted: 26 Sep 2016

See all articles by Martin Eling

Martin Eling

University of St. Gallen - Institute of Insurance Economics; University of Saint Gallen - School of Finance (SoF)

David Pankoke

University of St. Gallen - School of Finance

Date Written: Fall 2016

Abstract

This article reviews the extant research on systemic risk in the insurance sector and outlines new areas of research in this field. We summarize and classify 48 theoretical and empirical research papers from both academia and practitioner organizations. The survey reveals that traditional insurance activity in the life, nonlife, and reinsurance sectors neither contributes to systemic risk nor increases insurers’ vulnerability to impairments of the financial system. However, nontraditional activities (e.g., credit default swap underwriting) might increase vulnerability, and life insurers might be more vulnerable than nonlife insurers due to higher leverage. Whether nontraditional activities also contribute to systemic risk is not entirely clear; however, the activities with the potential to contribute to systemic risk include underwriting financial derivatives and providing financial guarantees. This article is not only likely of interest to academics but also highly relevant for the industry, regulators, and policymakers.

Suggested Citation

Eling, Martin and Pankoke, David, Systemic Risk in the Insurance Sector: A Review and Directions for Future Research (Fall 2016). Risk Management and Insurance Review, Vol. 19, Issue 2, pp. 249-284, 2016. Available at SSRN: https://ssrn.com/abstract=2842880 or http://dx.doi.org/10.1111/rmir.12062

Martin Eling (Contact Author)

University of St. Gallen - Institute of Insurance Economics ( email )

Kirchlistrasse 2
St. Gallen, 9010
Switzerland

University of Saint Gallen - School of Finance (SoF) ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

David Pankoke

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

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