Insurance guarantee schemes aim to protect policyholders from the costs of insurer insolvencies. However, guarantee schemes can also reduce insurers' incentives to conduct appropriate risk management. We investigate stock insurers' risk-shifting behavior for insurance guarantee schemes under the...

Insurance regulation is typically aimed at policyholder protection. In particular, regulators attempt to ensure the financial "safety" of insurance firms, for example, by means of capital regulation, and to enhance the "affordability" of insurance, for example, by means of price ceilings....

The standard formula of the Solvency II framework employs an approximate value-at-risk approach to define risk-based capital requirements. The parameterization of the standard formula determines how much additional capital insurers need in order to back investments in risky assets. This paper...

This paper empirically studies the impact of consumer reaction to default risk on an insurer's optimal solvency level. Using experimentally obtained data, we derive a price-default risk-demand-curve that serves as an input variable for the insurer's risk strategy. We show that an insurer should...

This paper compares the shareholder-value-maximizing capital structure and pricing policy of insurance groups against that of stand-alone insurers. Groups can utilise intra-group risk diversification by means of capital and risk transfer instruments. We show that using these instruments enables...

This paper analyzes how capital-related frictional costs (e.g., corporate or personal taxes) influence insurers' optimal pricing and safety level decisions. Frictional costs are modeled with an innovative generic approach that is compatible with many realistic forms of taxation. I show that in...

Depending on the point of time and location, insurance companies are subject to different forms of solvency regulation. In modern regulation regimes, such as the future standard Solvency II in the EU, insurance pricing is liberalized and risk-based capital requirements will be introduced. In...

In light of the upcoming Solvency II Pillar 3 disclosure regulation for the insurance industry, this paper explores the risk disclosure practices in annual reports of European primary insurers in the Dow Jones Stoxx 600 Insurance Index between 2005 - 2009. Based on a self-constructed risk...

Historical evidence like the global financial crisis from 2007-09 highlights that sector concentration risk can play an important role for the solvency of insurers. However, current microprudential frameworks like the US RBC framework and Solvency II consider only name concentration risk...

The Solvency II standard formula measures interest rate risk based on two stress scenarios which are supposed to reflect the 1-in-200 year event over a 12-month time horizon. The calibration of these scenarios appears much too optimistic when comparing them against historical yield curve...