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Curbing systemic risk in the insurance sector: A mission impossible?

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  • Bongini, Paola
  • Nieri, Laura
  • Pelagatti, Matteo
  • Piccini, Andrea

Abstract

This paper addresses the issue of systemic risk in insurance and investigates how financial markets evaluate the introduction of a new regulation addressed to global systemically important insurers (G-SIIs). We analysed the stock price reactions and the evolution of the distance-to-default of a sample of 44 of the world's largest insurers to the publication of the first list of 9 G-SIIs and the release of information regarding their new capital requirements and other policy measures. The results of our event study suggest that, overall, investors doubt the effectiveness of the new regulatory framework in reducing systemic risk in the insurance sector and curbing the moral hazard implications of a “too systemic to fail” policy.

Suggested Citation

  • Bongini, Paola & Nieri, Laura & Pelagatti, Matteo & Piccini, Andrea, 2017. "Curbing systemic risk in the insurance sector: A mission impossible?," The British Accounting Review, Elsevier, vol. 49(2), pages 256-273.
    • Handle: RePEc:eee:bracre:v:49:y:2017:i:2:p:256-273
    DOI: 10.1016/j.bar.2016.08.002
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    More about this item

    Keywords

    Systemic risk; Insurance companies; Event study; Regulatory reforms; Loss absorbency requirements;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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