IDEAS home Printed from https://ideas.repec.org/a/pal/gpprii/v47y2022i2d10.1057_s41288-020-00196-1.html
   My bibliography  Save this article

The financial impact of the implementation of Solvency II on the Mexican insurance sector

Author

Listed:
  • Nora Gavira-Durón

    (Universidad de las Americas Puebla (UDLAP))

  • Daniel Mayorga-Serna

    (Universidad de las Americas Puebla (UDLAP))

  • Alberto Bagatella-Osorio

    (Universidad de las Americas Puebla (UDLAP))

Abstract

This paper examines the effects of the regulatory changes implemented in the Mexican insurance sector in adjustment to the international regulations of Solvency II imposed by the International Association of Insurance Supervisors. The effect of regulatory changes on the risk and performance levels of foreign entities was analysed and compared with their domestic counterparts. Using a difference-in-difference estimator, significant evidence that foreign insurance companies enhanced their default risk after complying with the law was found. The findings showed that the stability levels of domestic entities were negatively affected. No effect on the performance level for both types of entities was found. This study provides evidence that foreign entities were already prepared for the change in regulation, as opposed to domestic ones, due to their association with their foreign holdings.

Suggested Citation

  • Nora Gavira-Durón & Daniel Mayorga-Serna & Alberto Bagatella-Osorio, 2022. "The financial impact of the implementation of Solvency II on the Mexican insurance sector," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(2), pages 349-374, April.
    • Handle: RePEc:pal:gpprii:v:47:y:2022:i:2:d:10.1057_s41288-020-00196-1
    DOI: 10.1057/s41288-020-00196-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41288-020-00196-1
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41288-020-00196-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Elijah Brewer & James M. Carson & Elyas Elyasiani & Iqbal Mansur & William L. Scott, 2007. "Interest Rate Risk and Equity Values of Life Insurance Companies: A GARCH–M Model," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(2), pages 401-423, June.
    2. Lepetit, Laetitia & Strobel, Frank, 2015. "Bank insolvency risk and Z-score measures: A refinement," Finance Research Letters, Elsevier, vol. 13(C), pages 214-224.
    3. Beck, Thorsten & De Jonghe, Olivier & Schepens, Glenn, 2013. "Bank competition and stability: Cross-country heterogeneity," Journal of Financial Intermediation, Elsevier, vol. 22(2), pages 218-244.
    4. Peter Liebwein, 2006. "Risk Models for Capital Adequacy: Applications in the Context of Solvency II and Beyond," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 31(3), pages 528-550, July.
    5. Jiang Cheng & Mary A Weiss, 2013. "Risk-Based Capital and Firm Risk Taking in Property-Liability Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 38(2), pages 274-307, April.
    6. Alexander Braun & Hato Schmeiser & Florian Schreiber, 2017. "Portfolio Optimization Under Solvency II: Implicit Constraints Imposed by the Market Risk Standard Formula," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 84(1), pages 177-207, March.
    7. Deborah L. Lindberg & Deborah L. Seifert, 2015. "Risk Management in the Insurance Industry: A Comparison of Solvency II to U.S. Insurance Regulations," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 38(2), pages 233-243.
    8. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2493-2519, October.
    9. Darr, Eric D. & Kurtzberg, Terri R., 2000. "An Investigation of Partner Similarity Dimensions on Knowledge Transfer," Organizational Behavior and Human Decision Processes, Elsevier, vol. 82(1), pages 28-44, May.
    10. De Haan, Jakob & Poghosyan, Tigran, 2012. "Bank size, market concentration, and bank earnings volatility in the US," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(1), pages 35-54.
    11. Douglas, Graeme & Noss, Joseph & Vause, Nicholas, 2017. "The impact of Solvency II regulations on life insurers’ investment behaviour," Bank of England working papers 664, Bank of England.
    12. Lemmon, Michael & Roberts, Michael R., 2010. "The Response of Corporate Financing and Investment to Changes in the Supply of Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(3), pages 555-587, June.
    13. 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.
    14. Swain, Robin & Swallow, David, 2015. "The prudential regulation of insurers under Solvency II," Bank of England Quarterly Bulletin, Bank of England, vol. 55(2), pages 139-153.
    15. International Monetary Fund, 2011. "Possible Unintended Consequences of Basel III and Solvency II," IMF Working Papers 2011/187, International Monetary Fund.
    16. Philippe Trainar, 2006. "The Challenge of Solvency Reform for European Insurers," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 31(1), pages 169-185, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Tidong & Cao, Jingsheng, 2023. "Impact of regulatory policy adjustments on insurance company costs and cost efficiency," Finance Research Letters, Elsevier, vol. 58(PD).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cynthia Van Hulle & Hans Degryse & Kristien Smedts, 2017. "Risk-sharing benefits and the capital structure of insurance companies," Working Papers Department of Accountancy, Finance and Insurance (AFI), Leuven 571404, KU Leuven, Faculty of Economics and Business (FEB), Department of Accountancy, Finance and Insurance (AFI), Leuven.
    2. Axel Möhlmann, 2021. "Interest rate risk of life insurers: Evidence from accounting data," Financial Management, Financial Management Association International, vol. 50(2), pages 587-612, June.
    3. Nimrod Segev & Sigal Ribon & Michael Kahn & Jakob Haan, 2024. "Low Interest Rates and Banks’ Interest Margins: Does Deposit Market Concentration Matter?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(2), pages 189-218, June.
    4. Brogi, Marina & Lagasio, Valentina, 2022. "Better safe than sorry. Bank corporate governance, risk-taking, and performance," Finance Research Letters, Elsevier, vol. 44(C).
    5. Ngambou Djatche, Melchisédek Joslem, 2019. "Re-exploring the nexus between monetary policy and banks' risk-taking," Economic Modelling, Elsevier, vol. 82(C), pages 294-307.
    6. Shijaku, Gerti, 2017. "Bank Stability and Competition: Evidence from Albanian Banking Market," MPRA Paper 79891, University Library of Munich, Germany.
    7. Bremus, Franziska & Ludolph, Melina, 2021. "The nexus between loan portfolio size and volatility: Does bank capital regulation matter?," Journal of Banking & Finance, Elsevier, vol. 127(C).
    8. Liu, Shuyan & Jia, Ruo & Zhao, Yulong & Sun, Qixiang, 2019. "Global consistent or market-oriented? A quantitative assessment of RBC standards, solvency II, and C-ROSS," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    9. Biswa Swarup Misra & Paolo Coccorese, 2022. "Market power, efficiency and stability of Indian banks," Economic Change and Restructuring, Springer, vol. 55(4), pages 2263-2292, November.
    10. Muhammad Ali & Chin-Hong Puah, 2018. "Does Bank Size and Funding Risk Effect Banks’ Stability? A Lesson from Pakistan," Global Business Review, International Management Institute, vol. 19(5), pages 1166-1186, October.
    11. 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.
    12. IJtsma, Pieter & Spierdijk, Laura & Shaffer, Sherrill, 2017. "The concentration–stability controversy in banking: New evidence from the EU-25," Journal of Financial Stability, Elsevier, vol. 33(C), pages 273-284.
    13. Coccorese, Paolo & Ferri, Giovanni, 2019. "Is competition among cooperative banks a negative sum game?," Journal of Institutional Economics, Cambridge University Press, vol. 15(4), pages 673-694, August.
    14. Khanh Ngoc Nguyen, 2019. "Revenue Diversification, Risk and Bank Performance of Vietnamese Commercial Banks," JRFM, MDPI, vol. 12(3), pages 1-21, August.
    15. Coccorese, Paolo & Girardone, Claudia & Shaffer, Sherrill, 2021. "What affects bank market power in the euro area? A country-level structural model approach," Journal of International Money and Finance, Elsevier, vol. 117(C).
    16. Hiep Ngoc Luu & Lan Thi Mai Nguyen & Kieu Trang Vu & Loan Quynh Thi Nguyen, 2023. "The impact of organizational culture on bank stability," Review of Quantitative Finance and Accounting, Springer, vol. 61(2), pages 501-533, August.
    17. Pavel Wünsch, 2017. "Own Funds Under Solvency Regime," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2017(3), pages 87-102.
    18. Giuliana Birindelli & Paola Ferretti & Marco Savioli, 2016. "Basel 3: Does One Size Really Fit All Banks' Business Models?," Working Paper series 16-20, Rimini Centre for Economic Analysis.
    19. Małgorzata Olszak & Mateusz Pipień & Iwona Kowalska & Sylwia Roszkowska, 2017. "What Drives Heterogeneity of Cyclicality of Loan-Loss Provisions in the EU?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(1), pages 55-96, February.
    20. Rubio-Misas, María, 2020. "Ownership structure and financial stability: Evidence from Takaful and conventional insurance firms," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:47:y:2022:i:2:d:10.1057_s41288-020-00196-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.