The Insurance Studies Institute (ISI) and Professor Kent Smetters of The Wharton School of the University of Pennsylvania will work together on Designing a Systemic Risk Regulator, a research project to study the need and optimal design of a systemic risk regulator in light of the recent financial crisis.

The project, which will be conducted by Smetters and funded by ISI; and David Torregrosa at the Congressional Budget Office will collaborate, but will receive no outside funding, according to ISI. The project will examine how the recent financial crisis reveals gaps in the current regulatory system and will examine options for constructing an improved regulatory system through a Systemic Risk Regulator. The goal is to promote financial stability among financially interdependent institutions by lessening the likelihood of a crisis while creating ex-ante mechanisms to deal with a major financial crisis that does materialize.

“The purpose of this research is to create a model that can be tested in reality and reliably utilized by those responsible for catastrophic risk management,” says Paul Siegert, ISI president and CEO. “Benefits may include more realistic funding of reserves for such risks, and less dependence on government and taxpayers to absorb costs after such events.”

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