Risk Propagation Between the Insurance and Financial Industries

Fall 2022 Actuarial Science and Financial Mathematics Seminar

Date and Time: Friday, December 16, 2022, 2:00 PM (CST)

Speaker: Zhiwei (Josh) Tong (University of Iowa)

Abstract: The insurance industry and the financial industry are intriguingly connected. Insurance companies are among the largest investors in capital markets, and they used to sale an enormous amount of financial protections. Thus, a distress in one industry could propagate to the other one, leading to systemic consequences. The sales of financial protections expose insurers to financial risks, while, on the other hand, could be a potential approach to reducing the losses in the financial industry. To understand the multifaceted role of insurance in systemic risk, we build network models which include protections against asset shocks. To understand the potential default propagation between the two industries, we build a probabilistic model which considers the dependence between two industries (interdependence) as well as that within each industry (intradependence).

About: Zhiwei (Josh) Tong is an Assistant Professor of Actuarial Science at the University of Iowa. He obtained his PhD degree from UNSW Sydney in 2021, under the supervision of Professor Qihe Tang and Professor Bernard Wong. During his PhD studies, he served as a PhD Teaching Fellow. His research interests center on systemic risk in insurance, credit portfolio losses, and cyber risk. He has published in European Journal of Operational Research, Insurance: Mathematics and Economics, and Journal of Banking & Finance, which are reputable journals in actuarial science and related fields.