Risks and regulation of insurance companies: is Solvency II the right answer?
AbstractThe role of insurance sector has grown in importance. While there is a plethora of academic literature on the needs for a banking regulation, literature on insurance regulation is scarce and mainly focused on asymmetry issues. In this paper, we describe the reasons for an insurance regulation. Recent developments faced by insurers modified the risks encountered by the sector, especially liquidity risk and systemic risk. The purpose of the discussion presented here is also to outline the specificities of the new framework for the regulation of European insurance undertakings, Solvency II, as it is currently discussed to provide an appropriate response to the changing needs of insurance regulation. Our analysis leads us to conclude that Solvency II answers well to the developing insurance sector. However, caution is warranted for some areas such as evaluation of embedded options and guarantees, risk transfer and financial conglomerates.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 08-007.
Length: 29 p.
Date of creation: Feb 2008
Date of revision:
Publication status: Published by: Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB)
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Insurance; Regulation; Solvency II; Liquidity risk; Systemic risk;
Find related papers by JEL classification:
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-15 (All new papers)
- NEP-CFN-2008-03-15 (Corporate Finance)
- NEP-IAS-2008-03-15 (Insurance Economics)
- NEP-REG-2008-03-15 (Regulation)
- NEP-RMG-2008-03-15 (Risk Management)
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- Greg Brunner & Pablo Gottret & Birgit Hansl & Vijayasekar Kalavakonda & Somil Nagpal & Nicole Tapay, 2012. "Private Voluntary Health Insurance : Consumer Protection and Prudential Regulation," World Bank Publications, The World Bank, number 13093.
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