Curbing systemic risk in the insurance sector: A mission impossible?

This paper addresses the issue of systemic risk in insurance and investigates how financial markets evaluate the introduction of a new regulation addressed to global systemically important insurers (G-SIIs). We analysed the stock price reactions and the evolution of the distance-to-default of a samp...

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Bibliographic Details
Published in:The British accounting review 2017-03, Vol.49 (2), p.256-273
Main Authors: Bongini, Paola, Nieri, Laura, Pelagatti, Matteo, Piccini, Andrea
Format: Article
Language:English
Subjects:
Event study
Insurance companies
Loss absorbency requirements
Regulatory reforms
Systemic risk
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Summary:This paper addresses the issue of systemic risk in insurance and investigates how financial markets evaluate the introduction of a new regulation addressed to global systemically important insurers (G-SIIs). We analysed the stock price reactions and the evolution of the distance-to-default of a sample of 44 of the world's largest insurers to the publication of the first list of 9 G-SIIs and the release of information regarding their new capital requirements and other policy measures. The results of our event study suggest that, overall, investors doubt the effectiveness of the new regulatory framework in reducing systemic risk in the insurance sector and curbing the moral hazard implications of a “too systemic to fail” policy.
ISSN:0890-8389
1095-8347
DOI:10.1016/j.bar.2016.08.002