Publication: Solvency Measures for Insurance Companies : Is There a Room for Improvement?
Date
2009-06-26
ISSN
Published
2009-06-26
Author(s)
Gurenko, Eugene N.
Itigin, Alexander
Abstract
Over the last few years, there has been
a considerable debate in the industry and in the academic
community about the accuracy and reliability of risk-based
solvency measures in approximating the level of risk
retained by insurance and reinsurance entities. This topic
was further reinvigorated by the recent enactment of second
solvency requirements by the European Parliament, which
should replace the current first solvency regulations in
2012. Despite divergence of opinions about the adequacy of
specific risk based measures of required solvency capital,
there seems to be a general consensus that in principle,
well-designed risk based capital (RBC) or solvency
requirements can help achieve an efficient reduction in the
expected costs of insolvencies by helping regulators to
identify weak insurers and intervene well before capital
falls below specified levels. The main objective of this
paper is to revisit both issues the accuracy and reliability
of most common risk-based measures of insurers'
solvency and the practicability of risk-based measures of
solvency for corrective regulatory action. The paper also
touches upon the role of financial incentives in developing
the RBC estimates.
Citation
“Gurenko, Eugene N.; Itigin, Alexander. 2009. Solvency Measures for Insurance Companies : Is There a Room for Improvement?. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/0f2f4b57-61d6-56b6-8b9d-4ef1fd3fe0bb License: CC BY 3.0 IGO.”