The Economics, Regulation, and Systemic Risk of Insurance Markets

by Felix Hufeld, Ralph S. J. Koijen, Christian Thimann

Overview

Despite the importance of insurance in enabling individual and collective social, economic, and financial activities, discussions about the macroeconomic role and risks of insurance markets are surprisingly limited. This book brings together academics, regulators, and industry experts to provide a multifaceted array of research and perspectives on insurance, its role and functioning, and the potential systemic risk it could create.

The first part discusses the macroeconomic role of insurance and how insurance is different from banking and general finance. Understanding the differences between the balance sheets of insurers and other financial intermediaries is essential for understanding the potential differences in risk nature and optimal regulation. The second part of the book focuses on the risks managed by the insurance sector and the potential for systemic risk. The chapters discuss the risks both on the asset and liability sides of insurers' balance sheets. The third part of the book covers the impact of regulation on insurance companies. Existing regulation is often complex and has a large impact on insurance companies' decision-making and functioning. The chapters also illustrate the unintended consequences of various forms of regulation. The book concludes with a summary of a survey that has been conducted in collaboration with McKinsey, where insurance executives have been asked about the risks and regulation in the insurance sector. The survey provides guidance for future research on insurance markets.

Product Details

ISBN-13:	9780198788812
Publisher:	Oxford University Press
Publication date:	12/27/2016
Pages:	248
Product dimensions:	6.20(w) x 9.20(h) x 0.90(d)

About the Author

Felix Hufeld is President of the German Federal Financial Supervisory Authority (BaFin) and member of the Supervisory Board of the Single Supervisory Mechanism (SSM) for the banks of the Eurozone. Previously he was Chief Executive Director Insurance Supervision at BaFin. He was also Chairman of the Executive Committee of the International Association of Insurance Supervisors (IAIS) and member of the Management Board of the European Insurance and Occupational Pensions Authority (EIOPA). Previously he was Partner at Westlake Partners. From 2001 to 2010 he served as Chief Executive Officer of Marsh Germany, Austria, and Northern Europe of Marsh & Mclennan Companies Inc. Prior to this he worked for Dresdner Bank as their Global Head Group Corporate Development, and for The Boston Consulting Group (BCG). He studied Law in Freiburg and received a Master in Public Administration at Harvard University.

Ralph S. J. Koijen is Professor of Finance at New York University Stern School of Business, on leave from London Business School. His areas of expertise are health and insurance markets, investments, and financial econometrics. He is also a Research Fellow of the CEPR and Netspar. Before joining London Business School, he was visiting Assistant Professor of Finance at New York University's Stern School of Business, and an Assistant and Associate Professor of Finance at the University of Chicago's Booth School of Business. Professor Koijen's research has been published in leading journals, such as Econometrica, the American Economic Review, The Journal of Finance, the Review of Financial Studies, and the Journal of Financial Economics. He has received various awards for his work including the Richard A. Crowell Memorial Prize, the Roger F. Murray Prize, Swiss Finance Institute Outstanding Paper Award, the Glucksman Institute Research Prize, and the Amundi-Smith Breeden Distinguished Paper Prize.

Christian Thimann is a Head of Strategy, Sustainability and Public Affairs of the AXA Group and affiliated Professor of Economics at the Paris School of Economics. He is also an External Member of the French Council of Economic Advisors and an Affiliated Professor at the Paris School of Economics. Previously Dr Thimann held senior positions at the European Central Bank (ECB), including Director General and Advisor to the President from 2008 to 2013. He also served as an Economist at the International Monetary Fund in Washington, DC. Dr Thimann holds a Bachelor's degree from Rheinische Friedrich-Wilhelms-Universitat Bonn, a Master's degree from the London School of Economics and Political Science, and a PhD from Ludwig-Maximilians Universitat Munchen.

Table of Contents

Introduction, Felix Hufeld, Ralph S. J. Koiijen, Christian ThinmannPart I: I. The Economics of Insurance and the Macroeconomic Role of Insurance1. What is Insurance and How Does it Differ from General Finance?, Christian Thimann2. The Macroeconomic Role of Insurance, Denis Kessler, Amelie de Montchalin, and Christian Thimann3. How the Insurance Industry Manages Risk, Denis Duverne and John HelePart II: Financial Stability and the Possibilities of Systemic Risk4. Risks of Life Insurers: Recent Trends and Transmission Mechanisms, Ralph Koijen and Motohiro Yogo5. Measuring Systemic Risk for Insurance Companies, Viral Acharya, Thomas Philippon, and Matthew Richardson6. Measuring Interest Rate Risk in the Life Insurance Sector: The US and the UK, Anna Paulson and Richard RosenPart III: I. Regulation7. How the Insurance Industry's Asset Portfolio Responds to Regulation, Bo Becker8. Spillover Effects from Risk Regulation on the Asset Side to Asset Markets, Andrew Ellul, Pab Jotikasthira, and Christian Lundblad9. A Regulatory Framework for Systemic Risk in the Insurance Industry, Felix HufeldPart IV: Open Questions Going Forward from Regulators and the Insurance Sector10. The Big Questions for the Insurance Sector: Findings from a Survey of Insurance Companies