The 2008 financial crisis highlighted the fragility of various sectors of the financial system and, among others, of the insurance sector. The empirical analysis and the economic literature underline the different intensity of the contamination modalities of the financial crisis depending on the different subjects involved; in this respect, the systemic importance of insurance undertakings is lower than that of other financial and banking institutions. At an international level, in the light of the evaluation criteria formulated by the Financial Stability Board, the International Association of Insurance Supervisors (IAIS) is currently developing a methodology aimed at indentifying global systemically important financial institutions (G-SIFIs). In this context, the need for a review of the regulatory regime, aiming at regulating in a progressively uniform fashion corporate crisis affecting systemically important insurance companies (see, European Commission, Consultation on a possible Recovery and Resolution Framework for Financial Institutions other than Banks, December 2012) is sensed at a EU level. As of now, at a EU level there exist no uniform rules regarding common settlement and recovery procedures; in addition, no distinctions are provided in relation to the size and operating features of the subjects involved. In particular, Directive 2001/17/EC on the reorganization and winding-up of insurance undertakings provides that, in the event of insolvency, the liquidation process shall be governed exclusively by the proceedings initiated in the insurance undertaking’s home country; in the absence of harmonization, each domestic regulation provides for further instruments of early intervention which shall be carried out in advance of the onset of a financial crisis. The deterioration and crisis of the insurance companies are therefore regulated in accordance with each member state’s relevant regulations. As to the Italian legal system, the relevant regulatory framework is contained in the Consolidated Insurance Law (Legislative Decree of September 7, 2005, No. 209), in the Bankruptcy Law (Royal Decree of March 16, 1942, No. 267) and the regulations issued by the domestic insurance regulatory autority, IVASS (see IVASS Regulation of November 13, 2007, No. 8 and Article 25 of IVASS Regulation of March 14, 2008, No. 19). Critical situations are regulated having regard to the different levels of criticality which may surface: hence, certain remedies are designed to allow the recovery of the company until the crisis is reversible; while certain other specific rules are provided for such situations of apparent insolvency in which an insolvency procedure for the winding-up of the business is needed. The first group of regulatory remedies consists of “protection, recovery and liquidation measures”, regulated by articles 221-239 of the Consolidated Insurance Law, among which a special reference shall be made to “extraordinary administration” (articles 231-237), which replaces, for insurance companies, the composition with creditors, as regulated by the Bankruptcy Law and applicable to commercial undertakings but not to insurance undertakings. The insolvency proceedings applicable to insurance companies is the "mandatory administrative liquidation", as regulated, in general, by the Bankruptcy Law in articles 194 and subsequent, and, in a more in-depth level, by the Consolidated Insurance Law in articles 245-265, and IVASS in Regulation of November 13, 2007, No. 8. The aforesaid recent initiatives adopted by the European Commission draw the attention on the effectiveness of the current institutional arrangements and on the opportunity to seek a more harmonized and effective regulationon on financial deterioration and crisis of systemically important insurance undertakings. In such scenario, one may prospectively envisage potential differences in the regulation and in the implementation of intervention policies with respect to the above-cited crisis, depending on the type of insurance undertaking involved. Our analysis will develop preliminary observations as to the regulatory issues which could surface in case such prospective interventions actually take place and become applicable EU regulations.
The Financial Crisis and Repercussions for the Insurance Sector
FARENGA, Luigi
2012
Abstract
The 2008 financial crisis highlighted the fragility of various sectors of the financial system and, among others, of the insurance sector. The empirical analysis and the economic literature underline the different intensity of the contamination modalities of the financial crisis depending on the different subjects involved; in this respect, the systemic importance of insurance undertakings is lower than that of other financial and banking institutions. At an international level, in the light of the evaluation criteria formulated by the Financial Stability Board, the International Association of Insurance Supervisors (IAIS) is currently developing a methodology aimed at indentifying global systemically important financial institutions (G-SIFIs). In this context, the need for a review of the regulatory regime, aiming at regulating in a progressively uniform fashion corporate crisis affecting systemically important insurance companies (see, European Commission, Consultation on a possible Recovery and Resolution Framework for Financial Institutions other than Banks, December 2012) is sensed at a EU level. As of now, at a EU level there exist no uniform rules regarding common settlement and recovery procedures; in addition, no distinctions are provided in relation to the size and operating features of the subjects involved. In particular, Directive 2001/17/EC on the reorganization and winding-up of insurance undertakings provides that, in the event of insolvency, the liquidation process shall be governed exclusively by the proceedings initiated in the insurance undertaking’s home country; in the absence of harmonization, each domestic regulation provides for further instruments of early intervention which shall be carried out in advance of the onset of a financial crisis. The deterioration and crisis of the insurance companies are therefore regulated in accordance with each member state’s relevant regulations. As to the Italian legal system, the relevant regulatory framework is contained in the Consolidated Insurance Law (Legislative Decree of September 7, 2005, No. 209), in the Bankruptcy Law (Royal Decree of March 16, 1942, No. 267) and the regulations issued by the domestic insurance regulatory autority, IVASS (see IVASS Regulation of November 13, 2007, No. 8 and Article 25 of IVASS Regulation of March 14, 2008, No. 19). Critical situations are regulated having regard to the different levels of criticality which may surface: hence, certain remedies are designed to allow the recovery of the company until the crisis is reversible; while certain other specific rules are provided for such situations of apparent insolvency in which an insolvency procedure for the winding-up of the business is needed. The first group of regulatory remedies consists of “protection, recovery and liquidation measures”, regulated by articles 221-239 of the Consolidated Insurance Law, among which a special reference shall be made to “extraordinary administration” (articles 231-237), which replaces, for insurance companies, the composition with creditors, as regulated by the Bankruptcy Law and applicable to commercial undertakings but not to insurance undertakings. The insolvency proceedings applicable to insurance companies is the "mandatory administrative liquidation", as regulated, in general, by the Bankruptcy Law in articles 194 and subsequent, and, in a more in-depth level, by the Consolidated Insurance Law in articles 245-265, and IVASS in Regulation of November 13, 2007, No. 8. The aforesaid recent initiatives adopted by the European Commission draw the attention on the effectiveness of the current institutional arrangements and on the opportunity to seek a more harmonized and effective regulationon on financial deterioration and crisis of systemically important insurance undertakings. In such scenario, one may prospectively envisage potential differences in the regulation and in the implementation of intervention policies with respect to the above-cited crisis, depending on the type of insurance undertaking involved. Our analysis will develop preliminary observations as to the regulatory issues which could surface in case such prospective interventions actually take place and become applicable EU regulations.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
