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Regulation of Insurance Markets

Listed author(s):
  • Ray Rees


    (University of Munich, Ludwigstr 28/III VG 80539 Munich, Germany.)

  • Hugh Gravelle


    (University of York, Heslington, York Y01 5DD, UK.)

  • Achim Wambach


    (University of Munich, Ludwigstr 28/III VG 80539 Munich, Germany.)

There have been major changes in the way European insurance markets are regulated, and there is still considerable debate about what the form and scope of regulation should be. This article examines the arguments for solvency regulation when consumers are fully informed of the insurer's insolvency risk. It is shown firms always provide enough capital to ensure solvency, unless there are restrictions on the composition of their asset portfolios. The conclusion holds even when competition means that only normal profits can be earned. This suggests that the role of regulation in insurance markets should be confined to providing consumers with information about the default risk of insurers. The Geneva Papers on Risk and Insurance Theory (1999) 24, 55–68. doi:10.1023/A:1008733315931

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Article provided by Palgrave Macmillan & International Association for the Study of Insurance Economics (The Geneva Association) in its journal The Geneva Papers on Risk and Insurance Theory.

Volume (Year): 24 (1999)
Issue (Month): 1 (June)
Pages: 55-68

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Handle: RePEc:pal:genrir:v:24:y:1999:i:1:p:55-68
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