Article ID: | iaor201522204 |
Volume: | 81 |
Issue: | 3 |
Start Page Number: | 623 |
End Page Number: | 652 |
Publication Date: | Sep 2014 |
Journal: | Journal of Risk and Insurance |
Authors: | Cummins J David, Chen Hua, Weiss Mary A, Viswanathan Krupa S |
Keywords: | risk |
This article uses daily market value data on credit default swap spreads and intraday stock prices to measure systemic risk in the insurance sector. Using the systemic risk measure, we examine the interconnectedness between banks and insurers with Granger causality tests. Based on linear and nonlinear causality tests, we find evidence of significant bidirectional causality between insurers and banks. However, after correcting for conditional heteroskedasticity, the impact of banks on insurers is stronger and of longer duration than the impact of insurers on banks. Stress tests confirm that banks create significant systemic risk for insurers but not vice versa.