Advertisement

Risks and Control of Insurance Undertakings

  • Antonella CappielloEmail author
Chapter
  • 20 Downloads

Abstract

Insurance companies are exposed to some risks that can be controlled as well as to some which are difficult to foresee. They are exposed not only to internal risks, but also to external ones. The length of some insurance contracts, which may run for many years, may compound these risks. The chapter highlights the peculiarity of features and of risks (life and non-life insurance) that the insurance undertakings have to face. Consequently, it focuses on the role of internal control systems, which become a key concern to cope with the complexity of insurance activity. The chapter ends by analysing the motivation and evolution of external supervision and regulation using a European and international vision.

Keywords

Insurance intermediation Insurance risks Internal control External supervision and regulation Solvency II USA solvency regime 

References

  1. American Academy of Actuaries. (2008, September). C3 Life and Annuity Capital Work Group. Presentation to the National Association of Insurance Commissioners Life Risk Based Capital, Work Group. Google Scholar
  2. Arnott, R., & Stiglitz, J. (1991). Equilibrium in Competitive Insurance Markets with Moral Hazard (National Bureau of Economic Research Working Paper Series, n. 3588).Google Scholar
  3. Arrow, K. J. (1970). Insurance, Risk and Resource Allocation. In K. J. Arrow (Ed.), Essay in the Theory of Risk Bearing. Amsterdam: North-Holland.Google Scholar
  4. Bianchi, T. (1975). Le banche di deposito. Torino: Utet.Google Scholar
  5. Boadway, R., Leite-Monteiro, M., Marchand, M., & Pestieau, P. (2014). Social Insurance and Redistribution with Moral Hazard and Adverse Selection (Discussion Paper Series). Centre for Economic Policy, Research n. 4253.Google Scholar
  6. Borch, K. H., Sandmo, A., & Aase, K. K. (1990). Economics of Insurance. Amsterdam: North-Holland.Google Scholar
  7. Broome, L., & Markham, J. W. (2000). Banking and Insurance: Before and After the Gramm-Leach-Bliley Act. The Journal of Corporation Law, 25, 723–786.Google Scholar
  8. Buckham, D., Wahl, J., Munagala, S., & Rose, S. (2010). Executive’s Guide to Solvency II. Hoboken, NJ: Wiley.Google Scholar
  9. Cappiello, A. (2018). L’attività asicurativa. Regole, gestione, business models. Milano: Franco Angeli.Google Scholar
  10. Cassandro, P. E. (1975). Le gestioni assicuratrici. Torino: Utet.Google Scholar
  11. CoSO—Committee of Sponsoring Organizations of the Treadway Commission. (1992). Internal Control over Financial Reporting.Google Scholar
  12. CoSO—Committee of Sponsoring Organizations of the Treadway Commission (2013). Internal Control—Integrated Framework.Google Scholar
  13. De Finetti, B., & Emanuelli, F. (1967). Economia delle assicurazioni. Torino: Utet.Google Scholar
  14. DeFrain, K. (2012, January). US Insurance Financial Regulatory Oversight and the Role of Capital Requirements. NAIC Center for Insurance and Policy Research. http://www.naic.org/cipr_newsletter_archive/vol2_oversight.htm.
  15. De Haan, J., Oosterloo, S., & Schoenmaker, D. (2015). Financial Markets and Institutions: A European Perspective. Cambridge: Cambridge University Press.Google Scholar
  16. Dionne, G., Fombaron, N., & Doherty, N. (2012). Adverse Selection in Insurance Contracting. Available at https://ssrn.com/abstract=2132555.
  17. Doff, R. (2016). The Final Solvency II Framework: Will It Be Effective? The Geneva Papers on Risk and Insurance—Issues and Practice, 41(4), 587–607.CrossRefGoogle Scholar
  18. D’Onza, G. (2008). Il sistema di controllo interno nella prospettiva del risk management. Milano: Giuffrè.Google Scholar
  19. Eling, M., Schmeiser, H., & Schmit, J. T. (2007). The Solvency II Process: Overview and Critical Analysis. Risk Management and Insurance Review, 10(1), 69–85.CrossRefGoogle Scholar
  20. European Commission. (2002, December). Report on the Prudential Supervision of Insurance Undertakings (Sharma Report), Conference of Insurance Supervisory Services of the Member States of the European Union.Google Scholar
  21. European Commission. (2007, July). Proposal for a Directive of the European Parliament and of the Council on the Taking-Up and Pursuit of the Business of Insurance and Reinsurance, Brussels.Google Scholar
  22. EIOPA—European Insurance and Occupational Pensions Authority. (2018). Failures and Near Misses in Insurance (pp. 1–52). Luxembourg.Google Scholar
  23. FIO—Federal Insurance Office. (2013, December). How to Modernize and Improve the System Insurance Regulation in the United States, Report.Google Scholar
  24. Finkelstein, A. (2015). Moral Hazard in Health Insurance. New York: Columbia University Press.Google Scholar
  25. Gupta, P. (2006, September). COSO 1992 Control Framework and Management Reporting on Internal Control: Survey and Analysis of Implementation Practices. Strategic Finance, 27–33.Google Scholar
  26. Handel, B. R. (2013). Adverse Selection and Inertia in Health Insurance Markets: When Nudging Hurts. American Economic Review, 103(7), 2643–2682.CrossRefGoogle Scholar
  27. Heisen, P., Kilian, A., Lötgerink, C., & Weirich, M. (2014). Solvency II, the Practical Implications for Asset Managers and Insurers. PwC. Available at https://www.pwc.nl/nl/assets/documents/pwc-memo-solvency-ii.pdf.
  28. Holzmuller I. (2009). The United States RBC Standards, Solvency II and the Swiss Solvency Test: A Comparative Assessment. The Geneva Papers, 34, 56–77.Google Scholar
  29. Hull, J. C. (2018). Risk Management and Financial Institutions. Hoboken, NJ: Wiley.Google Scholar
  30. Insurance Europe. (2014). Why Insurers Differ from Banks (pp. 1–60). Brussels.Google Scholar
  31. IAIS—International Association of Insurance Supervisors. (2004, October). A New Framework for Insurance Supervision: Towards a Common Structure and Common Standards for the Assessment of Insurance Solvency.Google Scholar
  32. IAIS—International Association of Insurance Supervisors. (2005, October). Towards a Common Structure and Common Standards for the Assessment of Insurance Solvency: Cornerstones for the Formulation of Regulatory Financial Requirements.Google Scholar
  33. IAIS—International Association of Insurance Supervisors. (2019, November). Insurance Core Principles. And Common Framework for the Supervision of Internationally Active Insurance Groups.Google Scholar
  34. Kasturi, R. (2006). Performance Management in Insurance Corporation. Journal of Business Administration, 5(1), 1–30.Google Scholar
  35. Kessler, D. (2008). Insurance Market Mechanism and Government Interventions. Journal of Banking & Finance, 32, 4–14.CrossRefGoogle Scholar
  36. Kesternich, I., & Schumacher, H. (2014). On the Use of Information in Oligopolistic Insurance Markets. Journal of Risk and Insurance, 81(1), 159–175.CrossRefGoogle Scholar
  37. Krischanitz, C. (2013). Comparison of the Regulatory Approach in Insurance and Banking in the Context of Solvency II (pp. 1–23). Brussels, Belgium: European Actuarial Consultative Group.Google Scholar
  38. Mason, J. R. (2015, June). Overview and Structure of Financial Supervision and Regulation in the US. European Parliament, Policy Department A. 1–54.Google Scholar
  39. Mishkin, F., & Eakins, S. (2018). Financial Markets and Institutions. Harlow, UK: Pearson Education.Google Scholar
  40. Olajide, S. (2013). Corporate Governance and Insurance Company Growth: Challenges and Opportunities. International Journal of Academic Research in Economics and Management Sciences, 2(1), 286–305.Google Scholar
  41. Outreville, J. F. (1998). Theory and Practice of Insurance. Boston: Kluwer Academic.CrossRefGoogle Scholar
  42. Ozigbo, A., & Orife, O. (2011). Internal Control and Fraud Prevention in Insurances Business. International Journal of Economic Development, Research and Investment, 2(3), 77.Google Scholar
  43. Paci, S. (1979). L’intermediazione finanziaria delle imprese di assicurazione, Bancaria, 2/3.Google Scholar
  44. Paci, S. (2004). Evoluzione della vigilanza assicurativa. Rivista Diritto Ed Economia Delle Assicurazioni, 4, 8–20.Google Scholar
  45. Rothschild, M., & Stiglitz, J. (1976). Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information. Quarterly Journal of Economics, 90, 629–649.CrossRefGoogle Scholar
  46. Santoboni F. (Ed.). (2017). Manuale di gestione assicurativa. Milano: Wolters Kluwer.Google Scholar
  47. Sharara, I., Hardy, M., & Saunders, D. (2010). A Comparative Analysis of U.S., Canadian and Solvency II Capital Adequacy Requirements in Life Insurance, Society of Actuaries, All Rights Reserved, University of Waterloo.Google Scholar
  48. Spencer, P. D. (2000). The Structure and Regulation of Financial Markets. Oxford: Oxford University Press.Google Scholar
  49. Van Rossum, A. (2005). Regulation and Insurance Economics. The Geneva Papers on Risk and Insurance—Issues and Practice, 30(1), 43–46.Google Scholar
  50. Von Bomhard, N. (2005). Risk and Capital Management in Insurance Companies. The Geneva Papers on Risk and Insurance—Issue and Practice, 30, 52–59. Google Scholar

Copyright information

© The Author(s) 2020

Authors and Affiliations

  1. 1.Department of Economics and ManagementUniversity of PisaPisaItaly

Personalised recommendations