Advertisement

Solvency II: The Supervisory Reporting and Market Disclosure

  • Alberto Floreani
Chapter

Abstract

The third pillar of Solvency II consists of supervisory reporting and market disclosure. This chapter focuses on market disclosure, the most innovative part of the Solvency II Pillar 3. In the author’s view, the pros—principally, market discipline and the European Union (EU) comparability of solvency public information across insurers—override the cons—principally, possibly window-dressing practices and comparability between solvency and the International Financial Reporting Standards (IFRS) financial statement data. However, the European Insurance and Occupational Pensions Authority (EIOPA) and national authorities should monitor the existence of side effects and, if they are judged relevant, suggest some improvement in the regulation. Insurers should introduce an integrated reporting system in order to make solvency and financial information more clear and comparable to the public, avoiding duplication of costs, and avoiding inconsistences in the reporting system.

References

  1. Allen, L., & Saunders, A. (1992). Bank window dressing: Theory and evidence. Journal of Banking & Finance, 16(3), 585–623. doi: 10.1016/0378-4266(92)90046-3.CrossRefGoogle Scholar
  2. Castagnolo, F., & Ferro, G. (2013). Could we rely on market discipline as a substitute for insurance regulation? Journal of Financial Regulation and Compliance, 21(1), 4–15.CrossRefGoogle Scholar
  3. CFO Forum. (2009). Market consistent embedded value principles. Retrieved from http://www.cfoforum.nl
  4. Cole, C., & McCullough, K. (2014). Basis risk, procyclicality, and systemic risk in the Solvency II equity risk module. Journal of Insurance Regulation, 33(1), 1–39.Google Scholar
  5. Doff, R. (2016). The final Solvency II framework: Will it be effective? Geneva Papers on Risk and Insurance: Issues and Practice, 41(4), 587–607. doi: 10.1057/gpp.2016.4.CrossRefGoogle Scholar
  6. Ehrlich, K., Kuschel, N., & Moormann, L. (2010). Solvency II and reinsurer ratings. Solvency Consulting Knowledge Series. Retrieved from www.munichre.com
  7. European Banking Authority. (2015). EBA report on banks’ transparency in their pillar 3 reports. Retrieved from http://www.eba.europa.eu
  8. Flannery, M. (2001). The faces of “market discipline”. Journal of Financial Services Research, 20, 107–119. doi: 10.1023/A:1012455806431.CrossRefGoogle Scholar
  9. Floreani, A. (2013). Risk measures and capital requirements: A critique of the Solvency II approach. Geneva Papers on Risk and Insurance: Issues and Practice, 38, 189–212. doi: 10.1057/gpp.2012.47.CrossRefGoogle Scholar
  10. Goldstein, I., & Sapra, H. (2014). Should banks’ stress test results be disclosed? An analysis of the costs and benefits. Foundations and Trends in Finance, 8(1), 1–54. doi: 10.1561/0500000038.CrossRefGoogle Scholar
  11. Lakonishok, J., Shleifer, A., Thaler, R., & Vishny, R. (1991). Window dressing by pension fund managers. Working Paper No. 3617, National Bureau of Economic Research.Google Scholar
  12. Morey, M., & O’Neal, E. (2006). Window dressing in bond mutual funds. Journal of Financial Research, 29(3), 325–347. doi: 10.1111/j.1475-6803.2006.00181.x.CrossRefGoogle Scholar
  13. Nissen-Ruenzi, A., Parwada, J., & Ruenzi, S. (2015). Information effects of the Basel bank capital and risk pillar 3. Disclosures on equity analyst research—An exploratory examination. Working Paper 70/2015, CIFR. Retrieved from http://ssrn.com/abstract=2670418
  14. Visser, E., & McEneaney, D. (2015). IFRS phase II comparison with Solvency II and MCEV. Milliman Briefing Note. Retrieved from http://www.milliman.com/insight/2015/IFRS-4-Phase-II-comparison-with-Solvency-II-and-MCEV/

Copyright information

© The Author(s) 2017

Authors and Affiliations

  • Alberto Floreani
    • 1
  1. 1.Catholic University of the Sacred HeartMilanItaly

Personalised recommendations