The Impact of Corporate Social Responsibility on Firms' Exposure to Tail Risk: The Case of Insurers

We propose a novel corporate social responsibility (CSR) index that captures various aspects of an insurer's internal and external CSR activities. We first show that insurers worldwide have significantly increased their CSR activities with the average index value almost doubling between 2006 and 2015. CSR activities are particularly pronounced at large firms, composite insurers, and insurance companies in Europe. We find that insurers' exposure to market risk in previous times significantly drives future CSR engagement. Finally, we provide empirical evidence for a causal and decreasing effect of an insurer's CSR on its tail risk as well as its short- and medium-term exposure to systemic risk.