The Contribution of Shadow Insurance to Systemic Risk

Soon Heng Leong; Carlo Bellavite Pellegrini; Giovanni Urga

doi:10.1016/j.jfs.2020.100778

The Contribution of Shadow Insurance to Systemic Risk

Soon Heng Leong, Carlo Bellavite Pellegrini, Giovanni Urga

City, University of London

Research output: Contribution to journal › Article

Abstract

Shadow insurance is a regulatory loophole exploited by certain insurance groups to increase risk exposure, potentially destabilising 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 ΔCoVaR and SRISK measures, we find that the practice of shadow insurance is a significant driver of global systemic risk.

Original language	English
Pages (from-to)	1-20
Number of pages	20
Journal	Journal of Financial Stability
Volume	51
DOIs	https://doi.org/10.1016/j.jfs.2020.100778
Publication status	Published - 2020

Keywords

Financial stability
Interconnectedness
Shadow banking activity
Size

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10.1016/j.jfs.2020.100778

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abstract = "Shadow insurance is a regulatory loophole exploited by certain insurance groups to increase risk exposure, potentially destabilising 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 ΔCoVaR and SRISK measures, we find that the practice of shadow insurance is a significant driver of global systemic risk.",

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AB - Shadow insurance is a regulatory loophole exploited by certain insurance groups to increase risk exposure, potentially destabilising 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 ΔCoVaR and SRISK measures, we find that the practice of shadow insurance is a significant driver of global systemic risk.

KW - Financial stability

KW - Interconnectedness

KW - Shadow banking activity

KW - Size

KW - Financial stability

KW - Interconnectedness

KW - Shadow banking activity

KW - Size

UR - http://hdl.handle.net/10807/167574

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JO - Journal of Financial Stability

JF - Journal of Financial Stability

ER -

The Contribution of Shadow Insurance to Systemic Risk

Abstract

Keywords

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