David Antonius Pankoke

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

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.

Systemic Risk and the Insurance Industry: Principal Linkages and Dependencies

Systemic risk and macroprudential supervision have been fundamentally important research topics in the financial services sector over the last five years. In the wake of the collapse of Lehman and American International Group (AIG), and the financial crisis more generally, both academics and practitioners have engaged in a great deal of discussion about the extent of systemic risk and the need for macroprudential supervision in the banking and the insurance sector.