NDLI: The Economics of Insurance, its Borders with Finance and Implications for Systemic Regulation

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The Economics of Insurance, its Borders with Finance and Implications for Systemic Regulation

Content Provider	EconStor
Author	Thimann, Christian
Abstract	Global financial regulators are currently reflecting on the nature of the insurance business. Specifically, they are trying to classify insurance into traditional' and non-traditional' activities, and to distinguish them from non-insurance' activities. Subsequently, they will seek to apply different regulatory treatments to these categories to achieve better control of systemic risk in the global financial system. This means that one of the most important current questions in international finance is what is insurance and where does insurance end?' This paper aims to elaborate on the economics of insurance and its borders with general finance. It argues that the classification challenge by regulators partly stems from terminological confusion between insurance activities and more general financial activities. Insurance and finance both use the same terms - in particular the ubiquitous notion of risk - but attach fundamentally different meanings to them. With the proper terminology at hand and a clear distinction between insurance products, product management activities and balance sheet management activities, the limits of insurance can be re-established. Such delineation is essential to determine appropriate systemic risk regulation.
File Format	PDF
Language	English
Publisher	Center for Economic Studies and Ifo Institute (CESifo)
Publisher Date	2015-01-01
Publisher Place	Munich
Access Restriction	Open
Rights Holder	http://www.econstor.eu/dspace/Nutzungsbedingungen
Subject Keyword	insurance economics finance systemic risk Financial Economics: General Insurance; Insurance Companies; Actuarial Studies Financial Institutions and Services: Government Policy and Regulation
Content Type	Text
Resource Type	Article

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