Costs and Benefits of Financial Regulation – An Empirical Assessment for Insurance Companies

Martin Eling and David Pankoke

No 1420, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: We empirically analyze the costs and benefits of financial regulation based on a survey of 76 insurers from Austria, Germany and Switzerland. Our analysis includes both established and new empirical measures for regulatory costs and benefits. This is the first paper that tries to take costs and benefits combined into account using a latent class regression with covariates. Another feature of this paper is that it analyzes regulatory costs and benefits not only on an industry level, but also at the company level. This allows us to empirically test fundamental principles of financial regulation such as proportionality: the intensity of regulation should reflect the firm-specific amount and complexity of the risk taken. Our empirical findings do not support the proportionality principle; for example, regulatory costs cannot be explained by differences in business complexity. One potential policy implication is that the proportionality principle needs to be more carefully applied to financial regulation.

Keywords: Insurance; Regulation; Cost-Benefit Analysis; Proportionality Principle (search for similar items in EconPapers)
Pages: 40 pages
Date: 2014-10
New Economics Papers: this item is included in nep-cba and nep-ias
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http://ux-tauri.unisg.ch/RePEc/usg/sfwpfi/WPF-1420.pdf (application/pdf)

Related works:
Journal Article: Costs and Benefits of Financial Regulation: An Empirical Assessment for Insurance Companies (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2014:20

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