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Regulation of Insurance Markets

Author

Listed:
  • 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.)

Abstract

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

Suggested Citation

  • Ray Rees & Hugh Gravelle & Achim Wambach, 1999. "Regulation of Insurance Markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 24(1), pages 55-68, June.
  • Handle: RePEc:pal:genrir:v:24:y:1999:i:1:p:55-68
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    Citations

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    Cited by:

    1. Eling, Martin & Gatzert, Nadine & Schmeiser, Hato, 2009. "Minimum standards for investment performance: A new perspective on non-life insurer solvency," Insurance: Mathematics and Economics, Elsevier, vol. 45(1), pages 113-122, August.
    2. Maathumai Nirmalendran & Michael Sherris & Katja Hanewald, 2012. "Solvency Capital, Pricing and Capitalization Strategies of Life Annuity Providers," Working Papers 201213, ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales.
    3. repec:eee:insuma:v:78:y:2018:i:c:p:123-135 is not listed on IDEAS
    4. Julien Hardelin & Sabine Lemoyne de Forges, 2012. "Raising Capital in an Insurance Oligopoly Market," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 37(1), pages 83-108, March.
    5. Renaud Bourlès, 2006. "How Can Insurance Companies Compete With MutualInsurers? The Role of Commitment," Working Papers halshs-00410765, HAL.
    6. Stoyanova, Rayna & Schlütter, Sebastian, 2012. "Safety versus affordability as targets of insurance regulation in an opaque market: A welfare approach," ICIR Working Paper Series 10/12, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    7. Inderst, Roman & Wambach, Achim, 2001. "Competitive insurance markets under adverse selection and capacity constraints," European Economic Review, Elsevier, vol. 45(10), pages 1981-1992, December.
    8. Fischer, Katharina & Schlütter, Sebastian, 2012. "Optimal investment strategies for insurance companies in the presence of standardised capital requirements," ICIR Working Paper Series 09/12, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    9. Dionne, Georges & Harrington, Scott, 2017. "Insurance and Insurance Markets," Working Papers 17-2, HEC Montreal, Canada Research Chair in Risk Management.
    10. Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
    11. Holopainen, Helena, 2007. "Integration of financial supervision," Research Discussion Papers 12/2007, Bank of Finland.
    12. Schlütter, Sebastian, 2011. "Capital requirements or pricing constraints? An economic analysis of measures for insurance regulation," ICIR Working Paper Series 03/11, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).
    13. repec:hal:wpaper:hal-00746245 is not listed on IDEAS
    14. Dutang, Christophe & Albrecher, Hansjoerg & Loisel, Stéphane, 2013. "Competition among non-life insurers under solvency constraints: A game-theoretic approach," European Journal of Operational Research, Elsevier, vol. 231(3), pages 702-711.
    15. Mälkönen, Ville, 2004. "Capital adequacy regulation and financial conglomerates," Research Discussion Papers 10/2004, Bank of Finland.

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