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Risks and regulation of insurance companies: is Solvency II the right answer?

Benjamin Lorent ()

Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: The role of insurance sector has grown in importance. While there is a plethora of academic literature on the needs for a banking regulation, literature on insurance regulation is scarce and mainly focused on asymmetry issues. In this paper, we describe the reasons for an insurance regulation. Recent developments faced by insurers modified the risks encountered by the sector, especially liquidity risk and systemic risk. The purpose of the discussion presented here is also to outline the specificities of the new framework for the regulation of European insurance undertakings, Solvency II, as it is currently discussed to provide an appropriate response to the changing needs of insurance regulation. Our analysis leads us to conclude that Solvency II answers well to the developing insurance sector. However, caution is warranted for some areas such as evaluation of embedded options and guarantees, risk transfer and financial conglomerates.

Keywords: Insurance; Regulation; Solvency II; Liquidity risk; Systemic risk (search for similar items in EconPapers)
JEL-codes: G20 G22 G28 (search for similar items in EconPapers)
Pages: 29 p.
Date: 2008-02
New Economics Papers: this item is included in nep-cfn, nep-ias, nep-reg and nep-rmg
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Published by: Université Libre de Bruxelles, Solvay Business School, Centre Emile Bernheim (CEB)

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Persistent link: https://EconPapers.repec.org/RePEc:sol:wpaper:08-007

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