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A Critical Analysis of the Solvency II Proposals

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  • René Doff

    () (Financial Management, Twente University, PO Box 217, Enschede 7500 AE, Netherlands.)

Abstract

The European Commission has recently published the Solvency II proposals with the objective to fundamentally review the insurance supervisory framework. We test the Solvency II framework against seven criteria developed by Cummins et al. describing how best to duplicate the operation of an efficient and complete market. We conclude that Solvency II satisfies most of these criteria. We recommend a more balanced framework between Pillar I and II/III. In this way, Pillar II/III will resolve some of the problems in Pillar I, such as inappropriate incentives of the capital requirements formulae (hard solvency capital requirement limit, modular minimum capital requirement). Areas for further work on Pillars II and III are operational and business risk, long-term effects of strategic decision-making. The Geneva Papers (2008) 33, 193–206. doi:10.1057/gpp.2008.2

Suggested Citation

  • René Doff, 2008. "A Critical Analysis of the Solvency II Proposals," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(2), pages 193-206, April.
  • Handle: RePEc:pal:gpprii:v:33:y:2008:i:2:p:193-206
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