The financial meltdown that began in 2007 revealed problems with the financial guarantee insurers and regulation of these insurers. Financial guarantee insurers, with business models dependent on AAA-credit ratings, were exposed to risks that threatened those ratings. These insurers had four...

The article analyses the link between Italian life insurers' profitability and bank affiliation. It also examines the influence that the differences in product mix and distribution costs displayed by bank affiliated versus traditional insurers has on results, and the changes that the big...

Interconnectedness among insurers and reinsurers at a global level is not well understood and may pose a significant risk to the sector, with implications for the macroeconomy. Models of the complex interactions among reinsurers and with other participants in the financial system and the real...

Repo pricing is characterized with its puzzling dual pricing measures: repo haircut and repo spread. This article develops a repo haircut model by designing haircuts to achieve high credit criteria, and identifies economic capital for repo's default risk as the main driver of repo pricing. A...

We review heterogeneous agent-based models of financial stability and their application in stress tests. In contrast to the mainstream approach, which relies heavily on the rational expectations assumption and focuses on situations where it is possible to compute an equilibrium, this approach...

Existing stress tests do not capture feedback loops between individual institutions and the financial system. To identify feedback loops, the European Systemic Risk Board has developed macroprudential surveys that ask banks and insurers how they would behave in a macroeconomic stress scenario....

Haircut, a discount on the market value of financial collateral, draws its intuition from earlier stock loan brokers' desire to withstand stock market meltdowns without losses. Nowadays it is commonly computed as the 99% tail loss during a 10 day period over a sufficiently long observation. Such...

Life insurers' odds of being placed under regulatory control (for example, conservatorship or receivership) during the financial crisis years of 2008 and 2009 increased with deteriorating fundamentals at a much higher rate than during normal times or during the previous recession. However, no...

The 2008-2009 financial crisis was the most serious shock to the U.S. financial system since the Great Depression of the 1930s. A number of large financial institutions failed during the crisis. Many institutions that survived did so only because of extraordinary actions undertaken by company...

Shadow insurance is a regulatory loophole exploited by certain insurance groups to increase risk exposure, potentially destabilizing the financial system. In this paper, we evaluate the contribution of shadow insurance to systemic risk of the global financial sector using a sample of 215...