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Why (Re)insurance is Not Systemic

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  • Denis Kessler

Abstract

type="main" xml:lang="en"> The traditional model of (re)insurance lacks the elements that make a financial institution systemically important: risks are effectively pulverized; liabilities tend to be prefunded, which eliminates most of the leverage in the traditional sense; and active asset-liability management reduces most of the liquidity mismatch that traditionally propagates systemic risk. (Re)insurers that have stuck to this traditional business model have successfully weathered the crisis, even playing a stabilizing role. Unfortunately, this is not sufficiently recognized in the current IAIS/FSB debate on assessing systemic risk in the (re)insurance sector.

Suggested Citation

  • Denis Kessler, 2014. "Why (Re)insurance is Not Systemic," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 81(3), pages 477-488, September.
    • Handle: RePEc:bla:jrinsu:v:81:y:2014:i:3:p:477-488
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    Cited by:

    1. de França Carvalho, João Vinícius & Guimarães, Acássio Silva, 2024. "Systemic risk assessment using complex networks approach: Evidence from the Brazilian (re)insurance market," Research in International Business and Finance, Elsevier, vol. 67(PA).
    2. Philippe Deprez & Mario V. Wüthrich, 2016. "Macroprudential Insurance Regulation: A Swiss Case Study," Risks, MDPI, vol. 4(4), pages 1-30, December.
    3. Martin Eling & Ruo Jia, 2017. "Recent Research Developments Affecting Nonlife Insurance—The CAS Risk Premium Project 2014 Update," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 20(1), pages 63-77, March.
    4. Torsten Heinrich & Juan Sabuco & J. Doyne Farmer, 2022. "A simulation of the insurance industry: the problem of risk model homogeneity," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(2), pages 535-576, April.
    5. Ben Ammar, Semir & Eling, Martin & Milidonis, Andreas, 2018. "The cross-section of expected stock returns in the property/liability insurance industry," Journal of Banking & Finance, Elsevier, vol. 96(C), pages 292-321.
    6. Desjardins, Denise & Dionne, Georges & Koné, N’Golo, 2022. "Reinsurance demand and liquidity creation: A search for bicausality," Journal of Empirical Finance, Elsevier, vol. 66(C), pages 137-154.
    7. Kanno, Masayasu, 2016. "The network structure and systemic risk in the global non-life insurance market," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 38-53.
    8. Martin Eling & David Antonius Pankoke, 2016. "Systemic Risk in the Insurance Sector: A Review and Directions for Future Research," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 19(2), pages 249-284, September.
    9. Bofinger, Peter & Schnabel, Isabel & Feld, Lars P. & Schmidt, Christoph M. & Wieland, Volker, 2015. "Zukunftsfähigkeit in den Mittelpunkt. Jahresgutachten 2015/16 [Focus on Future Viability. Annual Report 2015/16]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201516, February.

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