Tail-risk interconnectedness in the Chinese insurance sector

We investigate tail-risk interconnectedness in the Chinese insurance sector by proposing downside and upside tail-risk spillover networks before and after the onset of the COVID-19 pandemic. The constructed networks allow us to capture marginal tail losses and time-varying tail-risk spillover effects. To identify the tail-risk transmission mechanism, we analyze network metrics. We find that tail-risk interconnectedness increased after the pandemic, showing that the risk level of the insurance sector has risen. Moreover, we use predictive panel regressions to investigate the impact of COVID-19 on tail-risk interconnectedness. We find that insurers’ size, liability-to-asset ratio, equity ratio, and book value per share are common factors that affect downside and upside tail-risk interconnectedness. [Display omitted] •Interconnectedness for the Chinese insurance sector is studied by constructing downside and upside tail-risk spillover networks.•The tail-risk transmission mechanism is examined before and after the onset of the COVID-19.•The overall tail-risk interconnectedness increased since the COVID-19 period.•We identify characteristics of insurers that significantly contribute to the tail-risk interconnectedness.•Many common factors of insurers contribute to the downside and upside tail-risk interconnectedness.