Insurance Solvency Regulation: Regulatory Approaches Compared

Benjamin Lorent ()

No 10-041, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: In this paper we compare the main regulatory frameworks: American (US RBC, Risk-Based-Capital), Swiss (SST, Swiss Solvency Test) and European (Solvency II). We improve on the existing literature by focusing on technical aspects of regulation schemes, particularly the capital requirements’ calculation and by including latest quantitative and qualitative improvements of the Solvency II project. The comparison concludes that Swiss and European systems are advanced regulatory processes in comparison with American regulation although the latter system was perceived as a revolution some years ago. Even if the Swiss regime and the future European directive are quite similar, there are also some key differences to highlight. European approach to determine regulatory capital is mainly risk-sensitive, based on risk measures, whereas US RBC is mainly based on static factors and accounting data reported in the audited statutory annual statement. The three systems also differ with regards to the use of different risk measures, the consideration of operational and catastrophe risks, the use of internal models, the treatment of diversification effect, the limits imposed to investments, and the consideration of qualitative aspects.

Keywords: Solvency II; Swiss Solvency Test; US RBC; Insurance Regulation (search for similar items in EconPapers)
JEL-codes: G22 G28 G32 K23 (search for similar items in EconPapers)
Pages: 51 p.
Date: 2010-08
New Economics Papers: this item is included in nep-ias, nep-reg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published by:

Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/61180/1/wp10041.pdf wp10041 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sol:wpaper:2013/61180

Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... ulb.ac.be:2013/61180

Access Statistics for this paper

More papers in Working Papers CEB from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().