Abstract
In this paper, a dynamic mixture copula model is used to estimate the marginal expected shortfall in the South African insurance sector. We also employ the generalized autoregressive score model (GAS) to capture the dynamic asymmetric dependence between the insurers’ returns and the stock market returns. Furthermore, the paper implements a ranking framework that expresses to what extent individual insurers are systemically important in the South African economy. We use the daily stock return of five South African insurers listed on the Johannesburg Stock Exchange from November 2007 to June 2020. We find that Sanlam and Discovery contribute the most to systemic risk, and Santam turns out to be the least systemically risky insurance company in the South African insurance sector. Our findings defy common belief whereby only banks are systemically risky financial institutions in South Africa and should undergo stricter regulatory measures. However, our results indicate that stricter regulations such as higher capital and loss absorbency requirements should be required for systemically risky insurers in South Africa.