The advantages of a global solvency standard

Abstract

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. © 2010 The International Association for the Study of Insurance Economics.