A0937
Title: Catastrophic and systemic risk in the non-life insurance sector: A micro-structural contagion approach
Authors: Gabriele Torri - University of Bergamo (Italy)
Hana Dvorackova - VSB - Technical University of Ostrava (Czech Republic)
Davide Radi - VSB - Technical University of Ostrava (Italy) [presenting]
Abstract: Catastrophic events related to extreme weather and climate change are increasingly common and disrupting. The non-life insurance sector plays a key role in protecting the economic and financial system, and it is therefore of paramount importance to closely monitor its stability. Borrowing from the rich literature of micro-structural interbank contagion, we propose a model to study the stability of a non-life insurance sector in presence of external shocks and random non-diversifiable insurance claims. We show in a simulation study that the stability of such a sector is particularly sensitive to the presence of correlated reinsurance claims (i.e. large undiversifiable shocks, like the ones associated with climate-related catastrophic risk), and that such risk is present even if the reinsurance network is well diversified.
