Introduction: Symposium on Convergence, Interconnectedness, and Crises: Insurance and Banking

• Published date: 01 September 2014
• DOI: http://doi.org/10.1111/jori.12058
• Author: Georges Dionne,J. David Cummins
• Date: 01 September 2014

INTRODUCTION:SYMPOSIUM ON CONVERGENCE,

INTERCONNECTEDNESS,AND CRISES:INSURANCE AND

BANKING

A conference on Convergence, Interconnectedness, and Crises: Insurance and

Banking was held at Temple University in Philadelphia from December 8 to 10, 2011.

The conference was cosponsored by Temple University’s Advanta Center for

Research on Financial Institutions, SCOR Group, The Canada Research Chair in Risk

Management, HEC Montreal, CIRPEE (Quebec, Canada), and The Journal of Risk and

Insurance. Seventeen research papers and two keynote addresses were presented at

the conference, and six papers from the conference are published in this symposium.

The conference keynote addresses were delivered by Denis Kessler, Chairman and

CEO of SCOR Group, and Andrew W. Lo, Harris & Harris Group Professor of

Finance, MIT Sloan School of Management.

The Financial Crisis of 2007–2010 revealed significant interrelationships both within

and between the insurance and banking industries that contributed significantly to

the magnitude of the crisis and the resulting government bailout. The need for

additional research on interconnectedness provided the motivation for the

Conference. The objective was to help minimize or avoid future crises through

careful scholarly explorations of these interconnections. Researchers from around the

world spent 3 days delving into numerous insurance and banking topics, ranging

from systemic risk to implications of financial services mergers to extreme

correlations within the insurance industry.

The introductory article in this symposium, by Denis Kessler, is based on his keynote

speech at the Conference. In his article, Kessler argues that the (re)insurance industry

is not a significant source of systemic risk. Kessler emphasizes that (re)insurance

failures are very rare, orderly, long-term processes, unlike banking crises, which are

short term and associated with panics. He points out that a failing (re)insurance

company does not terminate its contracts overnight but continues to settle claims.

Thus, (re)insurance failures do not require sudden liquidation of assets and liabilities,

as in the case of many banking failures. One reason that banks are susceptible to

systemic risk is the interbank lending market, where risk is strongly concentrated due

to a network of very short-term, bilateral exposures. In contrast, the structure of the

(re)insurance market is hierarchical, in the sense that primary insurers cede a single

risk to many other reinsurers, which in turn often cede it to different retrocession-

naires. In contrast to retail bank deposits and wholesale market bank funding,

© The Journal of Risk and Insurance, 2014, Vol. 81, No. 3, 473–476

DOI: 10.1111/jori.12058

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