The Contribution of Shadow Insurance to Systemic Risk

31 Pages Posted: 17 Sep 2020

See all articles by Soon Heng Leong

Soon Heng Leong

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK

Carlo Bellavite Pellegrini

Catholic University of Milan

Giovanni Urga

Centre for Econometric Analysis, Faculty of Finance, Bayes Business School (formerly Cass), London, UK

Date Written: August 3, 2020

Abstract

Shadow insurance is a regulatory loophole exploited by certain insurance groups to increase risk exposure, potentially destabilizing the financial system. In this paper, we evaluate the contribution of shadow insurance to systemic risk of the global financial sector using a sample of 215 international insurance entities covering the 2004-2017 period. We detect shadow insurance by examining every reinsurance agreement on the Schedule S filings. Using both DCoVaR and SRISK measures, we find that the practice of shadow insurance is a significant driver of global systemic risk.

Keywords: Financial Stability; Interconnectedness; Shadow Banking Activity; Size

JEL Classification: G01; G22; G23.

Suggested Citation

Leong, Soon Heng and Bellavite Pellegrini, Carlo and Urga, Giovanni, The Contribution of Shadow Insurance to Systemic Risk (August 3, 2020). Available at SSRN: https://ssrn.com/abstract=3667455 or http://dx.doi.org/10.2139/ssrn.3667455

Soon Heng Leong

Centre for Econometric Analysis, Faculty of Finance, Cass Business School, London, UK ( email )

Carlo Bellavite Pellegrini

Catholic University of Milan ( email )

Largo Gemelli 1
Milan, MI Milano 20123
Italy

Giovanni Urga (Contact Author)

Centre for Econometric Analysis, Faculty of Finance, Bayes Business School (formerly Cass), London, UK ( email )

108 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 8698 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.bayes.city.ac.uk/faculties-and-research/experts/giovanni-urga

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
35
Abstract Views
383
PlumX Metrics