The Costs of Regulation for Insurance Business

During the last decades the insurance industry experienced a fundamental change in supervisory rules. The implementation of European insurance directives moved Austria's supervisory approach away from supervision based on full market control towards free product design of insurance contracts combined with controlling institutional guidelines, the fulfillment of solvency capital rules, and general restrictions on the investment portfolio. Guided by new banking regulations, the European Commission further changed the supervisory framework for the insurance industry. The Solvency II directive introduces risk based measures of solvency capital and requires additional control functions within insurance companies. This study will assess the costs associated with this move.