The Supervision of Insurance Companies

This chapter analyses in depth the supervision on insurance companies according to the second pillar of Solvency II, and has the following main goals: identifying the different approaches through which an insurer should control own system of risks (internal control approach, risk management approach, and asset-liability management (ALM) approach); describing the principles of the conect functioning of the internal control system (internal control approach); describing the principles for building an appropriate risk management framework with respect to the insurer’s system of risks (risk management approach); describing the principles of the asset-liability management (ALM approach); identifying the duties of the supervisors with respect to the control on the insurance companies; analysing the characteristics of the supervisory review process (SRP); identifying the characteristics of the last resort measure that is the capital add-on and that may result from the SRP; identifying the main functions of the Own Risk Solvency Assessment (ORSA) as the link between the internal control and the control performed by the supervisory authorities; describing the main features of the corporate governance of the sample of insurers identified in Section 2.3 in terms of role and responsibilities of the internal control system, of risk management practices and of investment portfolio.