Finite reinsurance: How does it concern supervisors? Some efficiency considerations in the light of prevailing regulatory aims

Abstract

Finite reinsurance transactions attracted the attention of insurance supervisors and beyond recently. This paper considers the resulting and ongoing discussion concerning the regulatory environment for finite reinsurance transactions. Consumer protection and financial stability are reflected in the light of cost-benefit considerations as criteria for the further design of finite reinsurance-related regulation and supervision. At the same time, some of the forces that influence the shaping of regulation and supervision are described. This article concludes that few, concise and, in an ideal case, worldwide applicable rules and principles are best suited to guide the development within the field of finite reinsurance. Such rules and principles would most probably have a positive impact on consumer protection and financial stability. This article therefore supports the IAIS intention to consider the topic of finite reinsurance further. © 2007 The International Association for the Study of Insurence Economics.