Do catastrophe bonds increase or decrease the exposure and contribution to systemic risk of the issuing insurance companies? And if such issues influence systemic stability, what design features of the bond and characteristics of the issuing insurer cause catastrophe bond issues to destabilize...

This paper investigates why U.S. life insurance groups use shadow insurance, i.e., reinsure their risks using affiliated, unauthorized, and unrated off-balance sheet entities rather than traditional reinsurers, and how such activities are allocated to individual group members. We find that such...