International Insurance Industry and Systemic Risk

Abstract

After the global crises, it is observed that not only the banking sector but also the insurance industry has systemic risk sources. Moreover, there are studies that found that insurance companies are even more risky compared to other financial intermediaries. In regard to this, life and non-life insurance companies and banks’ systemic risk causalities are analysed. Systematic risk measurements and conditional capital inadequacy were used. Dumitrescu-Hurlin panel causality tests were used to analyse the weekly global data for the years between 2005 and 2015. The main aim of the study is to find out if there is a relation between the systemic risk of life and non-life insurance and commercial banks. However, the results of the past studies indicate that the transfer of bank systemic risk has a strong role. The results of the study reveal that especially in regard to conditional risk based value where the systemic risks of life and non-life insurance companies and banks have strong causalities. It can be concluded that insurance companies’ systemic risk has a potential to be spreaded regarding to the geographical area.