The news of prudential supervision and its paradoxes

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The financial management of insurance companies is undergoing a profound renewal of its tools
and its methods. Three normative or regulatory devices accompany this movement
substantive: the new banking solvency rules (Basel II), the new
accounting standards (IAS) and, therefore, the reform of Solvency II prudential rules
by the European Union. The European Commission here plays the role of initiator of the
change brought about by international professional bodies in the other two cases: the
Basel Committee on Banking Supervision (BCBS) and the International Accounting Standard
Board (IASB).
The objective of this first chapter is to present the technical basis of the reform of
prudential standards as reflected in professional publications. The main idea is to
show the paradoxes of regime change and the differences in approach
concerns possible impacts.
Reflection on changing the model for estimating the financial situation of companies
insurance dates back to the beginning of 2000. It takes the form of a European project called
Solvency II or Solvency II, part of the continuation of the Solvency I exercise which had
gave birth to two directives:
– Directive 2002/12 / EC for life insurance;
– Directive 2002/13 / EC for non-life insurance.
The first phase of the project ended with the formal adoption of the proposal for
directive by the Commission on July 10, 2007 (Fitouchi, 2005). The dominant trait of
process is consultation with stakeholders, including insurance organizations
and the prudential supervisory authorities grouped together in the Committee of European Insurance
and Occupational Pensions Supervisors (Ceiops). The preparation foresees a number
Quantitative Impact Study (QIS), to examine the
consequences of the implementation of the new regime.
In this, the project follows the Lamfalussy methodology – to which we will come back -, which
is based on a set of good practices in the development of European standards:
– consultation of professionals in the development of standards;
– evaluation of the impacts of the decisions which are envisaged;
– a priori (and no longer just a posteriori) assessment of their relevance.
This is a long process, as shown in the diagram below, which however does not include
reflections and preparatory work started in 2000:

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