This paper explores insurance as a source of financial system vulnerability. It provides a brief overview of the insurance industry and reviews the risks it faces, as well as several recent failures of insurance companies that had systemic implications. Assimilation of banking-type activities by...

Contingent liabilities have gained prominence in the analysis of public finance. Indeed, history is full of episodes in which the financial position of the public sector is substantially altered-or its true nature uncovered-as a result of government bailouts of financial or nonfinancial...

Knightian uncertainty (ambiguity) implies presence of uninsurable risks. Institutional quality may be a good indicator of Knightian uncertainty. This paper correlates non-life insurance penetration in 70 countries with income level, financial sector depth, country risk, a measure of cost of...