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The principle of utmost good faith has been recognized as one of the essential principles in insurance, and its practice in other countries has been fairly applied to both parties. It is suspected that this insurance principle in regulation and its implementation in Indonesia only burdens one unilateral. Therefore, this study aims to prove the allegation that the principle of utmost good faith favors only the insurer and its application in dispute resolution directed at harming the insured party. This study uses a case study approach, with five insurance legal cases in the form of court decisions as purposively selected objects. Qualitative analysis (content analysis) was then carried out to obtain data: data codification, data presentation, and conclusions/verification. The principle of utmost good faith is regulated by the following documents of Indonesian insurance law: Indonesian Commercial Law Code, Act No.7/1992 and Act No.40/2014. The results showed that the utmost good faith principle in several Indonesian insurance regulations is more in favor of insurance companies. The insurance company always utilizes Article 251 of the Indonesian Commercial Law Code or the utmost good faith principle as a shield to commit fraud, and refuses to fulfill its legal liability with the aim of harming the insured. AcknowledgmentsWe thank to the Ministry of Education, Culture, Research and Technology of the Republic of Indonesia for supporting and funding this research until it was completed on time.

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SUMMARY: When property-casualty (P&C) insurers understate their loss reserves, they increase the appearance of solvency. Understating loss reserves can lead to inadequate loss protection for policyholders. This paper investigates the effect of external monitoring by state regulators on financial reporting by P&C insurers. Specifically, we analyze whether a regulatory financial examination of P&C insurers, as mandated and conducted by state law, results in reporting more conservative loss reserve estimates. We find that P&C insurers report more conservative loss reserve estimates during and following a regulatory financial examination. Whereas past studies use audits as external monitoring events around which fluctuations in loss reserves are observed, we focus on regulatory financial examinations as external monitoring events that mitigate the use of loss reserves to manage perceptions of company health. JEL Classifications: G22; H79; M42; M48. [ABSTRACT FROM AUTHOR]

This article examines the transformation of the global insurance industry under the influence of the COVID-19 pandemic. The author examines the roles of regulators, governments, consumers of insurance services, insurance, and reinsurance companies in responding to the new challenge. The COVID-19 pandemic was an unexpected factor for the global insurance industry, and as because of the global crisis caused by the SARS-CoV-2 coronavirus, there was a need to assess the transformation of processes in it. Accordingly, the materials of experts of international insurance associations were analyzed, in particular: International Association of Insurance Supervisors (IAIS), The International Credit Insurance and Surety Association (ICISA), European Federation of Insurance Intermediaries (BIPAR), International Association for the Study of Insurance Economics (IASIE) and others. The division of insurance market participants into two classes has been substantiated. In one class, there are consumers of insurance services and the insurance market regulators. In another class, there are insurance associations, insurance, and reinsurance companies. Based on the studies and reports of international insurance associations, the author revealed conflict escalation between insurance, reinsurance companies, governments (US, EU, China), and insurance market regulators due to the requirements of compliance with the principle of expediency and transparency in control and supervision, increased demands for reserves and quality assets, changes in the assessment of solvency, constant changes in regulations and requirements for additional information. From the considered impact of the COVID-19 pandemic given the existing regulatory documents Solvency II and IFRS-17, the problem of ambiguous formations in the regulatory acts in the paragraphs “Terms of the insurance contract” and “Exclusion of the insurance contract”– interpretation of the word: “material damage” and the difference in the words: “epidemic” and “pandemic”. Paper identifies the problems of these ambiguous formations in the normative-legal interpretation of the world regulatory bodies, the postulate of Solvency II and the lawsuits that caused these formations. The comparative analysis of the consequences of the COVID-19 pandemic was performed using the S&P 500 and S&P Insurance Select Industry indices. There was a shock due to the pandemic and the forecasted expectations of investors, who negatively assessed the insurance industry, and as a result, the price of the insurance industry index lost the connection of identical fluctuations with the S&P 500 and the price of the index fell relative to the S&P 500 index. The forecast has been developed to increase the demand for insurance, which will grow from the momentum of the world economy. After a reduction of 3,7% in 2020, the world economy is growing by 5,8% in 2021, which is significantly higher than the average of 3,0% over the previous decade. The paper illustrates the difference between economic growth in developing and developed countries. The author compares the recovery of the insurance industry after the shock of the COVID-19 pandemic and the global financial crisis in 2008: the insurance industry of the COVID-19 crisis is 14,35% growth and by the end of 2021 should exceed pre-crisis figures, the total amount of global insurance premiums accrued in 2021, will be 11,46% higher than the pre-crisis level of 2019. Conclusions and recommendations on the transformation processes that have arisen under the influence of the pandemic on the insurance industry has been substantiated.

While a lot of research concentrates on the respective merits of VaR and TCE, which are the two most classic risk indicators used by financial institutions, little has been written on the equivalence between such indicators. Further, TCE, despite its merits, may not be the most accurate indicator to take into account the nature of probability distribution tails. In this paper, we introduce a new risk indicator that extends TCE to take into account higher-order risks. We compare the quantiles of this indicator to the quantiles of VaR in a simple Pareto framework, and then in a generalized Pareto framework. We also examine equivalence results between the quantiles of high-order TCEs. [ABSTRACT FROM AUTHOR]

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Copyright of NTU Management Review is the property of NTU Management Review and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Replicating Portfolios for Economic Capital Calculations Financial services firms, such as banks and insurance companies, are expected by customers, regulators, and capital providers to hold a sufficient amount of capital to absorb the financial losses they may incur in times of financial stress. This capital provides security and protection for customers owed money by such firms, including, for example, those who have taken out life insurance with a life insurance provider. In "A Large-Scale Optimization Model for Replicating Portfolios in the Life Insurance," Adelmann, Fernandez-Arjona, Mayer, and Schmedders describe the replicating portfolio (RP) model used to approximate life insurance liabilities in a large global insurance company active in more than 215 countries. The model uses cash flow matching to calculate a portfolio of financial derivatives that replicates the behavior of the company's life insurance liabilities with the accuracy necessary to enable the calculation of economic capital. This paper also discusses the critical role played by RPs in the risk-management process of the insurance company. A Large-Scale Optimization Model for Replicating Portfolios in the Life Insurance Industry. Replicating portfolios have emerged as an important tool in the life insurance industry, used for the valuation of companies' liabilities. This paper describes the replicating portfolio (RP) model used to approximate life insurance liabilities in a large global insurance company. We describe the challenges presented by the latest solvency regimes in Europe and how the RP model enables this company to comply with the Swiss Solvency Test. The model minimizes the L1 error between the discounted life insurance liability cash flows and the discounted RP cash flows over a multiperiod time horizon for a broad range of different future economic scenarios. A numerical application of the RP model to empirical data sets demonstrates that the model delivers RPs that match the liabilities and perform well for economic capital calculations. [ABSTRACT FROM AUTHOR]

The paper provides a theoretical assessment of the Solvency II and Risk Based Capital solvency regimes and a numerical evaluation based on the two important characteristics of the Risk Based Capital framework: accounting principles (book values) and risk parameters calibration (standard deviations for premium and reserve risk sub-module) following the Solvency II standard formula methodology for a Romanian non-life insurance company. The results of the numerical evaluation of two assumptions reveal a substantial impact in the overestimation/underestimation of the solvency capital requirements.

While a lot of research concentrates on the respective merits of VaR and TCE, which are the two most classic risk indicators used by financial institutions, little has been written on the equivalence between such indicators. Further, TCE, despite its merits, may not be the most accurate indicator to take into account the nature of probability distribution tails. In this paper, we introduce a new risk indicator that extends TCE to take into account higher-order risks. We compare the quantiles of this indicator to the quantiles of VaR in a simple Pareto framework, and then in a generalized Pareto framework. We also examine equivalence results between the quantiles of high-order TCEs.

Dynamic hybrid products emerged in 2007 and are now well established in the German life insurance market. In this article, we study interaction effects between dynamic hybrid products and traditional deferred annuity contracts, that are sold by the same insurance company. The key question we investigate is whether the presence of dynamic hybrid products has a negative effect on the payout of traditional insurance products. We do so by using data drawn from a Monte Carlo simulation that is based on a model presented in this article. These data reveal that dynamic hybrid products reduce the payment to policyholders of traditional deferred annuities via the channel of surplus participation. [ABSTRACT FROM AUTHOR]

Effective October 1, 2018, the Member States of the European Union had to bring into force the laws, regulations and administrative provisions necessary to comply with Directive (EU) 2016/97 of the European Parliament and of the Council of January 20, 2016 on insurance distribution (IDD). The IDD arose out of a desire to give insurance customers equal protection regardless of the type of distributor from which they obtained insurance. Essentially, the IDD seeks to level the playing field of protections for insurance customers by simplifying, consolidating, and expanding customer protections when needed. The IDD has the stated goal of focusing on "the area of the disclosure of information" to customers. The directive is intentionally broad and applies "to persons whose activity consists of providing insurance or reinsurance distribution services to third parties." Although it is much too early to predict the course of the IDD within the European Union, a comparison can be drawn with the Model Acts promulgated by the National Association of Insurance Commissioners (NAIC) in the United States to glean an inkling as to where the IDD might be headed. Parts of the Model Acts have been in place for a number of years and, while the legal regimes they cover are modestly different, there are nonetheless broad lessons that can be drawn in the comparison of the two. Whether the path of the IDD follows the arc of the Model Acts, or not, will perhaps be attributed to three instrumental aspects: 1. The IDD is unquestionably focused on customer protection. The NAIC is more nearly concerned with uniformity. It may be that the IDD's focus will contribute to better traction among the EU Member States then Model Acts have experienced in the United States. 2. Unlike the IDD, the NAIC Model Acts are not comprehensive with respect to customer protection. 3. The NAIC Model Acts have seen inconsistent adoption by the states, a factor that has contributed to a lack of uniformity and constancy across any number of insurance products. While the IDD should not suffer from spotty adoption, the relative flexibility of the EU Member States in adopting more stringent rules may lead to a lack of uniformity and consistency similar to that of the Model Acts. Thus, the IDD may very well face the same headwinds faced by the Model Acts in the United States. Accurate predictions are always elusive when dealing with the implementation of regulation and legislation. Accordingly, we will watch with curiosity whether the IDD, which takes a much more global approach in customer protection, will see more success. [ABSTRACT FROM AUTHOR]

Copyright of Economic Annals-XXI / Ekonomìčnij Časopis-XXI is the property of Institute of Society Transformation and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The increasing role of technology is generating new challenges in fostering innovative insurance products and in offering new means of distribution for existing products. Herein, we focus on peer-to-peer insurance, where technology is used to connect policyholders and the insurance structure recalls its roots based on organised mutual solidarity. The aim is to highlight strengths and weaknesses of the broker model of peer-to-peer insurance. We address the main legal and regulatory issues by referring to European Union regulation on insurance and we develop an actuarial model to support our conclusions and evaluate the convenience of such a business model for policyholders. Although peer-to-peer insurance was created as a fairer alternative to the pool of traditional insurance companies, we see major challenges that need to be solved. The evidence sheds doubt on the convenience of the broker model for peer-to-peer insurance while the regulatory risks seem, paradoxically, certain. [ABSTRACT FROM AUTHOR]

Context: A political science literature has emerged on the policy feedback effects of alternative health care coverage expansions, focusing on whether programs like Medicare, Medicaid, and the Affordable Care Act can generate robust public constituencies. Yet, scholars have mainly examined direct governmental benefits and rarely studied the feedback effects from the underlying regulatory frameworks that allow health care markets to function, such as regulations that determine eligibility for nongroup and continuation coverage. Methods: Drawing on literature from multiple disciplines, this article analyzes political and policy factors that promote and undermine such regulations' capacity to stimulate positive feedback and the emergence of citizen constituencies. Findings: While some factors may help these regulations to cultivate constituencies, there are barriers to this positive feedback generation. The most notable is the failure of these regulatory policies to confer politically useful resources on citizens unless other, mutually supportive policies are also in place, such as policies to control premiums. Conclusions: Steps in the policy feedback model that are typically left unexplored in the literature deserve greater scrutiny when scholars examine the weak self-reinforcing effects of health insurance regulations. A take-away lesson, relevant to the Affordable Care Act, is that even when policies broaden nongroup coverage and ostensibly assist many people, a robust citizen constituency is unlikely to emerge, leaving key protections of access to health insurance vulnerable to erosion or reversal over time. [ABSTRACT FROM AUTHOR]

Small insurance firms with the limited number of policyholders have larger standard deviations of expected losses. The Risk-Based Capital (RBC) standards use the Value at Risk (VaR) methodology to determine the required capital and penalize small firms to allocate relatively large amounts. This study investigates the lowest insurance pool size and premium level that satisfy the RBC standards for a small hypothetical firm without raising additional capital. The insurance regulators have a chance to mitigate the adverse effects of RBC standards and enhance market efficiency if they: (a) determine how many of the small firms in the insurance market are distressed under the RBC standards, (b) create a residual reinsurance market that provides reinsurance coverage for small insurance firms, (c) provide easy access to financial markets for small insurance firms to raise additional capital, especially through common stock issuance, and (d) establish a two-tier RBC standards while expanding the coverage limits of the existing guarantee funds to protect policyholders from small insurance firm bankruptcies. [ABSTRACT FROM AUTHOR]

This study comparatively analyzes the EU insurance system and the Turkish insurance sector in light of the Solvency II regulation. Topics such as the foundation, certification, restructuring, supervision, and disclosure of insurance companies are also evaluated to determine the Turkish insurance industry’s capacity to integrate with that of the EU. Regulations aim to constitute a risk-based capital adequacy model by establishing a relationship between the risks of insurance companies and their financial resources. This requires the adjustment and application of the companies’ risk management rules and principles. An example of the standard method is presented to show the capital adequacy ratios of Turkish insurance companies from the perspective of harmonization with the EU single insurance market.

With Solvency II ready for implementation as per 2016, it is a good time to analyse the effectiveness of the framework. We build on earlier analyses of the preliminary framework dating from 2009. In the meantime many improvements have been implemented. We use 12 criteria to assess the effectiveness of Solvency II, and conclude that overall, Solvency II is effective. Not surprisingly, Solvency II is a major step ahead compared with the current supervisory framework. However, violations to some criteria remain. While some violations are because of simplifications, others are because of a lack of focus on particular risks (government bonds, inflation risk, liquidity risk). To resolve some of these violations, we propose specific prescribed and targeted stress tests through the own risk and solvency assessment and a more detailed focus on the effectiveness of governance structures. [ABSTRACT FROM AUTHOR]

We examine the effect of the state-level full parity mental illness law implementation on mental illness among college-aged individuals and human capital accumulation in college. We utilize administrative data on completed suicides and grade point average (GPA) and survey data on reported mental illness days and decisions to disenroll from college between 1998 and 2008 in a difference-in-differences (DD) analysis to uncover the causal effects of state-level parity laws. We find that state-level parity law reduces youth suicide rate and propensity to report any poor mental health day, increases college GPA, and does not change the propensity to disenroll from college. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für die gesamte Versicherungswissenschaft is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Insurance is commerce. It touches lives and their properties. An insurer's business is to make and sell insurance products. Though his main objective is to make money, he has, indeed, a social responsibility as well. Insurance regulation is not only for regulating the market and making it orderly, but also for orderly growth of insurance market. Development and performance are closely related. You cannot develop without performance. You cannot perform without setting regulation/plan/target. Regulation flows from insurance legislation to protect the public. What is insurance regulation? See Section 1. What is development and How to measure? See Section 2 for that. What is mantra for development? See Section 3 I have a final word at the end. [ABSTRACT FROM AUTHOR]

Purpose -- This paper aims to investigate the interaction between capital requirements and pricing constraints as measures for insurance regulation. Design/methodology/approach -- In a theoretical model framework, the author derives the insurer's shareholder-value-maximizing response to capital regulation, price regulation and the unregulated strategy as a benchmark; all three strategies are presented in an analytical form. Findings -- The paper demonstrates that risk-based capital requirements exhibit an efficiency advantage over price regulation and allow for lower premiums. Moreover, the analysis identifies situations in which price floors make insurance more expensive, but have no positive impact on the safety level. Practical implications -- The comparison between capital regulation and price floors provides policymakers with a methodology to evaluate which regulatory tool is more appropriate. Also, the article discusses that maximum discount rates for European life insurers could be ineffective when the new regulatory framework Solvency II is in place. Originality/value -- In all, the article obtains analytical and informative results with relevant implications for insurance regulation. [ABSTRACT FROM AUTHOR]

In January 2014, the European Union will introduce a new piece of insurance regulation, Solvency II. Its implementation will represent the latest pinnacle in the prescriptive approach adopted by EU regulators towards the insurance industry in their efforts to reduce risk and increase policyholder protection. It is also likely to become, in due course, the latest case study in the law of unintended consequences. [ABSTRACT FROM AUTHOR]

The development of the Single Market in the EU - and the extension of its principles to the EEA - has led to dangerous trends in bank regulation as there is a 'disconnect' between regulation and deposit insurance systems. Although these problems do not exist in insurance markets to any great extent, Single Market regulation gives rise to other problems in that sector. In particular, it is restricting free trade both within and between countries. We propose a radical new model that would promote free trade without centralisation. [ABSTRACT FROM AUTHOR]

The objective of this article is twofold: first, to present a holistic approach to insurance regulation and, second, to put forward the proposition that the establishment of guaranty funds will facilitate the effectiveness of the supervisory authorities in the European insurance markets, which will go through the consolidation process. Consolidation will materialise by means of mergers and acquisitions, exits and bankruptcies. It is argued that consumer expectations, intensified competition and the convergence of financial and insurance markets require the establishment of guaranty funds in all Member States of the European Union, in order to deal with the expected increased rate of insurer insolvencies. Such an evolution will provide supervisory authorities with more degrees of freedom in removing earlier impaired insurers from the market, instead of waiting and exacerbating the eventual insolvency deficits. The argument is that, in addition to protecting the victims of insolvencies, such an arrangement is optimal as an insurance device, which will increase consumer confidence and market stability. [ABSTRACT FROM AUTHOR]

Insurance and reinsurance companies provide their services and risk taking capacity not only in their home markets, but also in other territories and jurisdictions. Sophisticated supervisory approaches must exist to protect the policy-holders adequately in such a complex environment. It is thus not beneficial for supervisors, insurers and reinsurers as well as policy-holders if each territory establishes its own supervisory regime. Only a global supervisory approach can cope with the comprehensive requirements and would ensure that resources of all stakeholders are appropriately allocated. The paper compares the supervisory regimes in Europe and the Unites States, that is in the two main insurance markets. The analyses reveal that the future European standard Solvency II exhibits many features that would also be required for a potential future global solvency standard. [ABSTRACT FROM AUTHOR]

We consider probabilistic approaches and stress tests as methods for regulators to set the minimum solvency margin for insurers. Each method has advantages and disadvantages. We assess the implications of the global financial crisis for each method, concentrating on life insurers. We have concerns that the probabilities used in probabilistic approaches are not robust. Regulators may find it beneficial to focus on the use of stress tests, although there are lessons to learn from the global financial crisis about the design and use of such tests. [ABSTRACT FROM AUTHOR]