The aporetic financialisation of insurance liabilities: Reserving under Solvency II

Abstract

The valuation of insurance liabilities has traditionally been dealt with by actuaries, who closely monitored underlying illiquid features, assumed a long-term perspective, and exercised their own subjective, expert judgment. However, the new EU regulatory regime of Solvency II (S2) has come to require market-consistent valuation supplemented by a risk-sensitive capital. This is considered an unwanted shift towards short-termism that is misaligned with the industry’s long term and countercyclical character. The new principles place the ‘technicalising’ logic of financial economics over ‘contextualising’ actuarial know-how. Following existing analytics of valuation from the ethnography of reinsurance markets and the social studies of finance, such requirements appear either as an alarming attack against the actuarial component of traditional valuation practice, or else as a preserver of it, through a process of enfolding at the heart of the financialisation project. This article holds that the case of S2 challenges both these analytics of valuation. S2’s financialisation project, precisely by attempting to construct itself, deconstructs itself into an actuarial project, in a recurring, aporetic process. In this respect, fair (or otherwise) valuation remains always undecidable, inconclusive, and thus responsible.

Kapitalismus und Nachhaltigkeit

“…Nach der Finanzkrise 2008 haben die Europäischen Aufsichtsbehörden einige Reformen für eine resilientere Risikoerfassung der Finanzinstitute vorgenommen, da diese in unbeaufsichtigter Form ihre Risiken nicht adäquat einschätzten, was schließlich zum Zusammenbruch des weltweiten Finanzsystems führte. Seither schaltet sich die Finanzaufsicht direkt in die interne Risikobewertung der Banken (Baud/Chiapello 2017) und Versicherungen (Fytros 2021) ein, indem sie deren Anwendung interner Risikomodelle kontrolliert und teilweise vorschreibt (Coombs/van der Heide 2020). Von hier ist es nur noch ein relativ kleiner Schritt, auch Klimarisiken zu operationalisieren, wie dies von der Internationalen Bank für Zahlungsausgleich gefordert wird.…”

Impacts of Insurers’ Financial Insolvency on Non-Life Insurance Companies’ Profitability: Evidence from Bangladesh

“…Among other components of the financial system of Bangladesh, the non-life insurance business plays a critical role by contributing to an appropriate mechanism for the transition of risk. Financially stable insurance firms-which are able to meet policyholders' liabilities-are needed to keep the country's financial sustainability and inclusive growth (Fytros 2021).…”

“…In order to sustain the level of its development, the security of the country's property and business, raising potential financial stability, and promoting trade and commerce, are quite necessary and unavoidable. A financially stable insurance industry is able to provide security to property and businesses by taking all sorts of financial risks, which effectively reduces their anxiety and stress (Fytros 2021). Puławska (2021) argued that a well-developed and financially healthy insurance industry enhances the stability of financial markets.…”