Insurance Markets Risk Affects Global Reinsurance Market Risk? Evidence from USA and Europe Insurance Markets

Abstract Reinsurance is the last shelter of traditional international risk management. Insurance companies cede part of their risks incurred to the reinsurance companies and this enhances the proper risk diversification procedure. This paper investigates the risk transmission characteristics from the USA and Europe insurance markets on the Global reinsurance market in order to analyse the risk affection of insurance to the reinsurance sector. The results suggest that there is a relatively low risk influence of non-life and life insurance companies on the global reinsurance index. Also, last four years the U.S. non-life and life insurance markets volatility asymmetry has an impact on the volatility of the global reinsurance index in terms of bad and good news. The volatility persistence is high before and after the pandemic period, indicating that if there is an extreme volatility shock in the insurance markets, the impact will occur faster on global reinsurance, except for the European non-life insurance index, which has the lowest impact on the reinsurance market in terms of the volatility persistence. JEL classification: G22, G32, D53, C5. Keywords: Reinsurance, Risk Analysis, Non- Life Insurance, Life Insurance, TGARCH.