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Tail Risk Networks of Insurers Around the Globe: An Empirical Examination of Systemic Risk for G‐SIIs vs Non‐G‐SIIs
Author(s) -
Chen Hua,
Sun Tao
Publication year - 2020
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/jori.12296
Subject(s) - systemic risk , tail risk , business , spillover effect , credit risk , globe , economics , financial economics , financial crisis , actuarial science , econometrics , medicine , microeconomics , macroeconomics , ophthalmology
A bstract In this article, we investigate systemic risk of 157 insurers around the globe. We construct tail risk networks among these insurers using a single‐index model for quantile regressions with a variable selection technique. We develop a new network‐based systemic risk indices, taking into account expected tail losses of insurers, direct and indirect contagion effects, and the time‐varying strength of tail risk spillover. Our systemic risk indices successfully recognize global systemically important insurers (G‐SIIs). We find that on average G‐SIIs are more systemically relevant than non‐G‐SIIs, particularly during the recent U.S. financial crisis. We also find a small group of non‐G‐SIIs that are more important than G‐SIIs. Our results have significant implications for systemic risk regulation.