Curbing systemic risk in the insurance sector: A mission impossible?

This paper addresses the issue of systemic risk in insurance and investigates how financial markets evaluate the introduction of a new regulation addressed to global systemically important insurers (G-SIIs). We analysed the stock price reactions and the evolution of the distance-to-default of a sample of 44 of the world's largest insurers to the publication of the first list of 9 G-SlIs and the release of information regarding their new capital requirements and other policy measures. The results of our event study suggest that, overall, investors doubt the effectiveness of the new regulatory framework in reducing systemic risk in the insurance sector and curbing the moral hazard implications of a "too systemic to fail" policy. (C) 2016 Elsevier Ltd. All rights reserved.