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Comparing the systemic risk of Italian insurers and banks

Author

Listed:
  • Michele Leonardo Bianchi

    (Bank of Italy)

  • Federica Pallante

    (IVASS)

Abstract

In this paper we assess the systemic risk of listed Italian insurers and banks by estimating four different measures based on conditional value-at-risk and marginal expected shortfall. Daily estimates in the period from 2007 to 2023 are obtained by assuming a parametric model able to capture volatility clustering phenomena. We keep the framework as simple as possible to get closed formulas or straightforward simulations for the estimation of the risk measures empirically studied in this paper. This allows us to compare the systemic risk of the entities in our sample without resorting to complex model calibration and risk measure evaluation, and to explore the dynamics of systemic risk on more than 4,000 daily observations for the 14 banks and 4 insurers in our sample. Our findings, partly justified by the composition of our sample (i.e. the few insurance companies considered have significantly higher market capitalizations compared with some of the banks in the sample), reveal that, across three out of four risk metrics, insurance entities exhibit slightly higher systemic risk levels than banks, on average. The least systemic banks consistently maintain lower risk profiles compared with the least systemic insurance companies. Conversely, the most systemic bank is slightly riskier than the most systemic insurance company. However, there is more variability among banks compared with insurance companies.

Suggested Citation

  • Michele Leonardo Bianchi & Federica Pallante, 2025. "Comparing the systemic risk of Italian insurers and banks," Questioni di Economia e Finanza (Occasional Papers) 922, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_922_25
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2025-0922/QEF_922_25.pdf
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    References listed on IDEAS

    as
    1. Viral V. Acharya & Lasse H. Pedersen & Thomas Philippon & Matthew Richardson, 2017. "Measuring Systemic Risk," The Review of Financial Studies, Society for Financial Studies, vol. 30(1), pages 2-47.
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    4. Denisa Banulescu-Radu & Christophe Hurlin & Jérémy Leymarie & Olivier Scaillet, 2021. "Backtesting Marginal Expected Shortfall and Related Systemic Risk Measures," Management Science, INFORMS, vol. 67(9), pages 5730-5754, September.
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    More about this item

    Keywords

    systemic risk; value-at-risk; conditional value-at-risk; marginal expected shortfall; banks; insurers;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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