The Regulatory Framework for Market Discipline

This chapter provides a wide description of the regulatory framework for market discipline in the European insurance industry in light of the importance assumed by this theme under the framework for European insurers’ capital requirements (Solvency II). It enters into the debate that aims to identify the function of supervision in financial markets, the flows of mandatory information established, and the role of stakeholders in this process. Thus, it provides a deep analysis of market discipline in the European insurance industry and has six main goals: identifying the role and relevance of supervisory authorities in financial markets; describing the characteristics of supervision and market discipline in the European insurance industry under the regulatory framework of Solvency II (Directive 2009/138/EC); identifying the schemes, principles, and initiatives for supervision and market discipline; distinguishing disclosure into three types: disclosure by insurers (addressed both to supervisory authorities and to the public), disclosure by supervisory authorities, and disclosure by groups; comparing the European to the globally accepted principles of insurance regulation, in an attempt to promote consistency and homogeneity; identifying the internal and external stakeholders involved in the market discipline process and the roles they play.