Specifically, Adams considers three key questions:
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The first concerns the development of regulation over the last 100 years. It is clear that the nature and system of insurance regulation has changed substantially, but what has driven this change and to what end? Can we identify any major themes which describe, across time periods, how the insurance market and its regulation have developed?
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The second question he considers flows directly on from the first and concerns what new pressures a range of developments in the insurance markets are providing for the regulator. If we are able to observe any longer-term trends in the insurance market, what new challenges does this present and what is the appropriate response from a regulatory perspective?
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Finally, he considers the most substantial ongoing development to insurance regulation, which is of course Solvency II. The question concerns the Financial Services Authority (FSA) and, from 2013, the Prudential Regulatory Authority's (PRA) approach to the implementation of an increasingly risk sensitive approach to capital requirements.
In considering these questions, Adams believes that three key trends emerge from some of the major phases of the history of what we can call modern insurance regulation and these continue to this day:
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First, there has been an increasing focus both by regulators and by the industry on being more and more risk-sensitive in their approach to the measurement and management of risk. By this it is meant there is an ever-growing focus on ensuring that firms’ individual solvency positions reflect the specific nature of their idiosyncratic risk profile. Recently we can see this through the increasing demands to model risks and quantify their impacts under a range of stress scenarios. The full speech (see link) explores what has driven us to this position and with what regulatory consequences.
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Secondly, we also see a trend of greater demands for transparency from insurance companies which have led to them providing a substantially increased volume and content of publically available financial information. This speech considers what some of the drivers have been behind this trend.
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The final trend is the development of a regulatory framework which has moved first from one of self regulation onto a statutory basis, and then secondly moved from being national in its characteristics to one which is increasingly shaped by international standards.
Full speech
© FSA - Financial Services Authority
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