Insurance and the Credic Crisis: Impact and Ten Consequences for risk Management and Supervision

Although the insurance industry is less affected than the banking industry, the credit crisis has revealed room for improvement in its risk management and supervision. Based on this observation, we formulate ten consequences for risk management and insurance regulation. Many of these reflect current discussions in academia and practice, but we also add a number of new ideas that have not yet been the focus of discussion. Among these are specific aspects of agency and portfolio theory, a concept for a controlled runoff for insolvent insurers, new principles in stress testing, improved communication aspects, market discipline, and accountability. Another contribution of this article is to embed the current practitioners’ discussion in the recent academic literature, for example, with regard to the regulation of financial conglomerates. JEL classification: G01; G15; G20; G22