Systemically Relevant Business Activities of Insurance Companies
Authors: Fabian Regele, Christian Kubitza (both Goethe University, International Center for Insurance Regulation)
Title: Systemically Relevant Business Activities of Insurance Companies
Abstract: We identify business activities of insurance companies that promote the spillover of equity shocks to or from other companies. For this purpose, we employ several systemic risk measures with respect to financial and non-financial markets. Our results indicate that insurance companies' contribution and exposure to market shocks is mainly related by liability activities. Thereby, non-traditional insurance business is the main driver of spillover risk. Diversification between life and reinsurance business may substantially decrease the contribution and exposure to all financial and non-financial markets. On the asset side, banking activities increase the interconnectedness with the non-financial, banking, and real estate market. Liquid assets decrease the interconnectedness with financial institutions but increase it with the non-financial market. Our results strongly support activity-based macro-prudential regulation.