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The contribution of shadow insurance to systemic risk

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  • Leong, Soon Heng
  • Pellegrini, Carlo Bellavite
  • Urga, Giovanni

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.

Suggested Citation

  • Leong, Soon Heng & Pellegrini, Carlo Bellavite & Urga, Giovanni, 2020. "The contribution of shadow insurance to systemic risk," Journal of Financial Stability, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finsta:v:51:y:2020:i:c:s1572308920300772
    DOI: 10.1016/j.jfs.2020.100778
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    Cited by:

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    3. Jean-Baptiste Hasse, 2022. "Systemic risk: a network approach," Empirical Economics, Springer, vol. 63(1), pages 313-344, July.

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    More about this item

    Keywords

    Financial stability; Interconnectedness; Shadow banking activity; Size;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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