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

Eling, Martin; Pankoke, David Antonius

doi:10.2139/ssrn.2577336

Cited by 3 publications

(3 citation statements)

References 57 publications

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“…Kwon et al (2005) find that regulators tend to stress their responsibilities to protect policyholders' interests, and thus are thoroughly involved with the exit strategy of a distressed insurer. Eling and Pankoke (2016) suggest that insurance regulation provides a unique environment for observing P&C insurer investment behaviour since their securities investments are constrained by regulators. Conservative regulatory environments can provide an incentive for insurers to change their investment portfolio allocation behaviour.…”

Section: Regulationmentioning

confidence: 99%

Under pressure: investment behaviour of insurers under different financial and regulatory conditions

Reddic

2020

Geneva Pap Risk Insur Issues Pract

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Firms that have losses are expected to sell tax-free securities and replace them with taxable securities since they can no longer benefit from tax savings. However, after the most recent financial crisis, firms' decisions to rebalance their investment portfolios may have led to additional losses during a period of stressed financial performance and increased insurance regulation. This study examines portfolio allocation behaviour in the property and casualty insurance industry. The results show that investment limitations imposed by insurance regulators can inhibit desired investment allocation post the financial crisis.

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Section: Regulationmentioning

confidence: 99%

Under pressure: investment behaviour of insurers under different financial and regulatory conditions

Reddic

2020

Geneva Pap Risk Insur Issues Pract

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“…Theoretically, regulators should consider the costs and benefits of regulation to produce net benefit at the societal level. Eling and Pankoke (2016) provide a non-exhaustive list of possible positive and negative effects of insurance regulation for various participants in the market. On the positive side, policyholders should enjoy better protection of their interests because the regulation would prevent and limit insolvencies and abusive market practices and would foster market discipline by reducing asymmetric information and improving transparency.…”

Section: Life Insurance Developmentmentioning

confidence: 99%

Regulatory examinations and life insurance development

Srbinoski¹,

Poposki

Born

et al. 2022

JFRC

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Purpose Solvency and market conduct regulations play a crucial role in supporting life insurance development by boosting consumer confidence and securing a stable environment for insurers to write business. The regulation encapsulates not only the legal framework but also its enforcement. This study aims to focus on the latter and investigate the impact of solvency and market conduct examinations on life insurance development within a homogenous legal environment in the USA. Design/methodology/approach To test the relationship between the regulatory examinations and life insurance development, this study uses annual data for 51 US states over the period 2013–2018 and uses fixed and random effects panel regressions controlling for the possible omitted variables bias and serial correlation. This study constructs two groups of indicators to measure the robustness and ability of regulators to prevent insolvencies and opportunistic market practices and estimate their effects on market development. Findings The results show that more stringent regulators with respect to solvency examinations deter life insurers from their markets and channel to those markets with lenient examiners, hurting the development of life insurance in the stringent states. Additionally, regulators boost consumer confidence by providing robust market conduct practices, which results in higher life insurance demand. Originality/value This study contributes to the debates about the pros and cons of the current state-led regulation in the USA and the general benefits/costs of regulation for insurance market development.

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“…In general, regulators must pay more attention to avoid a negative impact of financial turmoil on insurance companies. Eling and Pankoke (2016) provide an empirical perspective of the benefits and costs related to financial regulation. Using data from 76 insurers collected through a survey from Austria, Switzerland, and Germany, we evaluate the benefit and cost of regulation of both the industry level and the company level.…”

Section: Evidence: Regulatory Objectivesmentioning

confidence: 99%

Separating life and health from property/casualty insurance operations: an assessment of solvency in the Egyptian insurance market

Abdelzaher¹,

Born²

2022

JIR

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In this article, we evaluate the effect of a recent change in regulation of insurers operating in the Egyptian insurance market that required all insurance companies to separate their life and health (L&H) and property/casualty (P/C) activities. We examine,specifically, the effect on the solvency of P/C insurers when they are required to form two completely separate companies for their operations (i.e., divest of their L&H business). Separating into separate entities may increase the transparency of the insurer’s operations, especially with respect to how they allocate capital across the company. Using financial data for all insurers in the Egyptian market for the period 2006–2015, we test whether solvency—captured via 13 solvency surveillance ratios—is affected by the decree. For robustness, we run the analysis for the whole market and for private companies only, focusing on P/C insurers only before and after the decree. Our findings indicate that the likelihood of insolvency, based on our evaluation of solvency ratios, increased after the decree.

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

Cited by 3 publications

References 57 publications

Under pressure: investment behaviour of insurers under different financial and regulatory conditions

Under pressure: investment behaviour of insurers under different financial and regulatory conditions

Regulatory examinations and life insurance development

Separating life and health from property/casualty insurance operations: an assessment of solvency in the Egyptian insurance market

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