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The Evolution of Insurance Regulation in the EU Since 2005

Author

Listed:
  • Pierre-Charles Pradier

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Labex ReFi - UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Arnaud Chneiweiss

    (Fédération Française de l'Assurance - FFA - Fédération française de l'assurance)

Abstract
The Solvency 2 package, which came into force on 1 January 2016, has had strong implications for insurance companies' market conduct, consumer relation and solvency. An ongoing process with the Financial Stability Board and the International Association of Insurance Supervisors addressing systemic risk is also impacting systemic insurers. These milestones of insurance regulation are aimed at solving the social cost of the failure of financial institutions, in order to prevent future crisis. This chapter reviews the detail of these considerable reforms and shows the consistency of the whole: prevention of systemic and microeconomic risk is first seen as the prevention of regulatory arbitrage with the banking sector. This thorough legal package has a cost not only for every firm (cost of implementation of reforms, recurring cost of compliance including direct cost of funding supervisory authorities, indirect administrative costs and cost of regulatory capital) but also for the sector as a whole. We show that most of these costs have been played down so far, since the crisis prompted the authorities to appear tough on finance and set an example. Unfortunately, costs lead to market concentration and uniformization, which have significant systemic implications. To address this issue, finance future growth, advance market integration and development, we offer some insights into simplification and focusing of insurance regulation.

Suggested Citation

  • Pierre-Charles Pradier & Arnaud Chneiweiss, 2017. "The Evolution of Insurance Regulation in the EU Since 2005," Post-Print hal-03265038, HAL.
    • Handle: RePEc:hal:journl:hal-03265038
    DOI: 10.1007/978-3-319-44287-7_9
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    References listed on IDEAS

    as
    1. J. David Cummins & Martin F. Grace & Richard D. Phillips, 1998. "Regulatory solvency prediction in property-liability insurance: risk-based capital, audit ratios, and cash flow simulation," Working Papers 98-20, Federal Reserve Bank of Philadelphia.
    2. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    3. Christian Thimann, 2015. "The Economics of Insurance, its Borders with Finance and Implications for Systemic Regulation," CESifo Working Paper Series 5207, CESifo.
    4. Haubrich, Joseph G. & Lo, Andrew W. (ed.), 2013. "Quantifying Systemic Risk," National Bureau of Economic Research Books, University of Chicago Press, number 9780226921969, Febrero.
    5. Benjamin Lorent, 2010. "Insurance Solvency Regulation: Regulatory Approaches Compared," Working Papers CEB 10-041, ULB -- Universite Libre de Bruxelles.
    6. 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.
    7. Eling, Martin & Pankoke, David, 2013. "Basis Risk, Procylicality, and Systemic Risk in the Solvency II Equity Risk Module," Working Papers on Finance 1306, University of St. Gallen, School of Finance.
    8. Mr. Andre O Santos & Douglas Elliott, 2012. "Estimating the Costs of Financial Regulation," IMF Staff Discussion Notes 2012/011, International Monetary Fund.
    9. repec:dau:papers:123456789/5825 is not listed on IDEAS
    10. Bierth, Christopher & Irresberger, Felix & Weiß, Gregor N.F., 2015. "Systemic risk of insurers around the globe," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 232-245.
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    Cited by:

    1. Sholoiko, Antonina, 2017. "The Development Of European Insurance Market Infrastructure," EUREKA: Social and Humanities, Scientific Route OÜ, issue 6, pages 3-7.
    2. Laurent Cappelletti & Nicolas Dufourg, 2016. "Solvabilité II, quels apports pour la gouvernance des risques ? Résultats d'une recherche-intervention au sein d'une mutuelle française," Post-Print hal-01901188, HAL.
    3. Meier, Samira & Rodriguez Gonzalez, Miguel & Kunze, Frederik, 2021. "The global financial crisis, the EMU sovereign debt crisis and international financial regulation: lessons from a systematic literature review," International Review of Law and Economics, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Banking union; Banking supervision; resolution of banks; capital markets union;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G01 - Financial Economics - - General - - - Financial Crises

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