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Insurance and the Credit Crisis: Impact and Ten Consequences for Risk Management and Supervision

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  • Martin Eling

    (Institute of Insurance Science, Ulm University, Helmholtzstr. 22, Ulm 89069, Germany)

  • Hato Schmeiser

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, St. Gallen 9010, Switzerland)

Abstract

Although the insurance industry is less affected than the banking industry, the credit crisis has revealed room for improvement in its risk management and supervision. Based on this observation, we formulate ten consequences for risk management and insurance regulation. Many of these reflect current discussions in academia and practice, but we also add a number of new ideas that have not yet been the focus of discussion. Among these are specific aspects of agency and portfolio theory, a concept for a controlled run-off for insolvent insurers, new principles in stress testing, improved communication aspects, market discipline, and accountability. Another contribution of this paper is to embed the current practitioners’ discussion in the recent academic literature, for example, with regard to the regulation of financial conglomerates.

Suggested Citation

  • Martin Eling & Hato Schmeiser, 2010. "Insurance and the Credit Crisis: Impact and Ten Consequences for Risk Management and Supervision," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(1), pages 9-34, January.
  • Handle: RePEc:pal:gpprii:v:35:y:2010:i:1:p:9-34
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    Citations

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    Cited by:

    1. Eling, Martin & Pankoke, David, 2012. "Systemic Risk in the Insurance Sector – What Do We Know?," Working Papers on Finance 1222, University of St. Gallen, School of Finance.
    2. Bierth, Christopher & Irresberger, Felix & Weiß, Gregor N.F., 2015. "Systemic risk of insurers around the globe," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 232-245.
    3. repec:eee:riibaf:v:42:y:2017:i:c:p:1401-1412 is not listed on IDEAS
    4. Mühlnickel, Janina & Weiß, Gregor N.F., 2015. "Consolidation and systemic risk in the international insurance industry," Journal of Financial Stability, Elsevier, vol. 18(C), pages 187-202.
    5. Elyas Elyasiani & Elena Kalotychou & Sotiris Staikouras & Gang Zhao, 2015. "Return and Volatility Spillover among Banks and Insurers: Evidence from Pre-Crisis and Crisis Periods," Journal of Financial Services Research, Springer;Western Finance Association, vol. 48(1), pages 21-52, August.
    6. Irresberger, Felix & Bierth, Christopher & Weiß, Gregor N.F., 2017. "Size is everything: Explaining SIFI designations," Review of Financial Economics, Elsevier, vol. 32(C), pages 7-19.
    7. Degryse, Hans & Smedts, Kristien & Van Hulle, Cynthia, 2017. "Risk-sharing benefits and the capital structure of insurance companies," CEPR Discussion Papers 11838, C.E.P.R. Discussion Papers.
    8. Power, Michael & Ashby, Simon & Palermo, Tommaso, 2013. "Risk culture in financial organisations: a research report," LSE Research Online Documents on Economics 67978, London School of Economics and Political Science, LSE Library.
    9. Karsten Paetzmann, 2011. "Discontinued German life insurance portfolios: rules-in-use, interest rate risk, and Solvency II," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 19(2), pages 117-138, May.
    10. Gounopoulos, Dimitrios & Molyneux, Philip & Staikouras, Sotiris K. & Wilson, John O.S. & Zhao, Gang, 2013. "Exchange rate risk and the equity performance of financial intermediaries," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 271-282.
    11. Miller, Amalia R. & Eibner, Christine & Gresenz, Carole Roan, 2013. "Financing of employer sponsored health insurance plans before and after health reform: What consumers don’t know won’t hurt them?," International Review of Law and Economics, Elsevier, vol. 36(C), pages 36-47.

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