Tail Risk Networks of Insurers Around the Globe: An Empirical Examination of Systemic Risk for G-SIIs v.s. Non G-SIIs
the Journal of Risk and Insurance, 87(2): 285-318, June 2020
55 Pages Posted: 13 Sep 2017 Last revised: 11 May 2020
Date Written: June 18, 2019
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
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