Regulation Flashcards
Types of Regulatory philosophy
Market-led or social welfare
What are the 5 types of insurance markets
Socialised, Nationalistic, Protected, Traditional, Liberal
Socialised market
No private insurers completely run by the state
Give an example of a Socialised market in the Irish context
VHI
Natonalisitc market
No foreign insurers
Where are nationalistic markets found and what is the effect on these places
Emerging markets, it prevents them from fully emerging as they must internalise all the risk
Protected market
Market access is restricted and different treatment to different insurers. This creates a lack of transparency in the market.
Traditional
Efforts made by regulators to render the market more competitive but problems still continue so the government intervenes to try and fix this
Liberal
There is no discrimination in the market with a capitalist approach
What market type is Ireland?
Traditional
How is more competition and innovation sought to be achieved?
Through the capitalist model and less regulation
Why is re-regulation happening?
Consumers are scared and don’t trust insurers
Ex post regulation
The government regulates after an offence occurred
What are the goal of ex-post regulation?
To prevent it from happening again
What are the benefits of ex-post regulation
Allows innovation and risk-taking
Ex-ante regulation
Prevents an offence from occurring the in the first place
What are the drawbacks of ex-ante regulation
Prevents innovation
When is ex ante regulation imposed?
When there is a lack of regulation or in a nationalistic, protected or socialised market
What is principal based regulation?
Where parameters are given and you must work within them
Rules-based regulation
This is what you can and can’t do
What is the effect of rules-based regulation?
Regulatory Arborgage
Regulatory Arborgage
Where you move from a distraction of high regulation to one of low regulation
Para fiscal taxation
Take money from tax and put it aside as an insurance fund for catastrophic losses
ORSA
Own risk and solvency assessment - how insurers intend to meet their solvency requirements.
What actions can insurers take against insurers in difficulty
- Mergers
- Cease unprofitable practices
- Buy out insurers
- DB wind up (pensions act)
What lines do we see insolvency guarantees?
Non-life
Explain how insolvency guarantees work
Every insurer pays 2% of gross premiums into a fund that is used to pay out if an insurer becomes insolvent
