Tail Risk Networks of Insurers Around the Globe: An Empirical Examination of Systemic Risk for G-SIIs v.s. Non G-SIIs

Forthcoming, the Journal of Risk and Insurance

55 Pages Posted: 13 Sep 2017 Last revised: 20 Jun 2019

See all articles by Hua Chen

Hua Chen

University of Hawaiʻi at Mānoa

Tao Sun

Lingnan University

Date Written: June 18, 2019

Abstract

In this paper, we investigate systemic risk of 157 insurers around the globe. We construct tail risk networks among these insurers using a single-index model for quantile regressions with a variable selection technique. We develop new network-based systemic risk indices, taking into account expected tail losses of insurers, direct and indirect contagion effects, and the time-varying strength of tail risk spillover. Our systemic risk indices successfully recognize global systemically important insurers (G-SIIs). We find that on average G-SIIs are more systemically relevant than non G-SIIs, particularly during the recent U.S. financial crisis. We also find a small group of non G-SIIs that are more important than G-SIIs. Our results have significant implications for systemic risk regulation.

Keywords: systemic risk, tail risk contagion, network analysis, single-index models with variable selection, the global insurance industry

Suggested Citation

Chen, Hua and Sun, Tao, Tail Risk Networks of Insurers Around the Globe: An Empirical Examination of Systemic Risk for G-SIIs v.s. Non G-SIIs (June 18, 2019). Forthcoming, the Journal of Risk and Insurance. Available at SSRN: https://ssrn.com/abstract=3035625 or http://dx.doi.org/10.2139/ssrn.3035625

Hua Chen (Contact Author)

University of Hawaiʻi at Mānoa ( email )

2404 Maile Way, E-602e
Honolulu, HI 96822
United States
(808) 956-8063 (Phone)
(808) 956-9887 (Fax)

Tao Sun

Lingnan University ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

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