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The Contribution of Shadow Insurance to Systemic Risk

Leong, S. H., Bellavite Pellegrini, C. and Urga, G. ORCID: 0000-0002-6742-7370 (2020). The Contribution of Shadow Insurance to Systemic Risk. Journal of Financial Stability, 51, 100778. doi: 10.1016/j.jfs.2020.100778

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.

Publication Type: Article
Additional Information: © 2020. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Financial stability; Interconnectedness; Shadow banking activity; Size.
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
Date available in CRO: 21 Nov 2019 11:05
Date deposited: 5 August 2020
Date of acceptance: 27 July 2020
Date of first online publication: 15 August 2020
URI: https://openaccess.city.ac.uk/id/eprint/23248
[img] Text - Accepted Version
This document is not freely accessible until 15 February 2022 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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