Search Results (25)

Proportionality, pivotal to EU regulations and Solvency II, tailors rules to insurers’ size and complexity. Inconsistent application by supervisory authorities (NSAs) necessitates clarity to prevent undue costs. This study examines the issue via a review of the literature and industry discussions, emphasizing Solvency II’s introduction of proportionality and the varied interpretations it evokes. Transparent communication is crucial, and regulatory evolution must align with market dynamics, with the European Insurance and Occupational Pensions Authority (EIOPA) fostering convergence. Assessing proportionality mandates a comprehensive evaluation of an insurer’s nature, scale, and complexity. Regulatory distinctions between first-party and third-party risks could enhance market efficiency. Ultimately, a holistic, market-oriented approach is essential for proportionate regulation in the insurance sector, requiring concerted efforts to elucidate frameworks, foster transparency, and align regulatory evolution with market dynamics. Full article

Insurance companies play a pivotal role in the financial systems of developing countries, wielding substantial influence on systemic financial stability. Thus, understanding their efficiency, performance, and sustainability is paramount for policymakers and stakeholders alike. The aim of this paper is to evaluate the relative efficiency of insurance companies within the North Macedonian market spanning the years 2018 to 2022. Employing the input-oriented BCC DEA model, the study integrates capital and labour as inputs, while assessing risk-pooling/bearing services and intermediate function as outputs. Our findings underscore the fluctuating efficiency levels within North Macedonia’s insurance sector. Notably, the sector exhibited its peak efficiency in 2018 at 83.62%, dipping to its lowest point of 73.81% in 2020. Moreover, discerning between life and non-life insurers, we observe an average relative efficiency of 0.8067 for non-life insurers, contrasted with a higher average efficiency score of 0.9011 for life insurance companies over the examined period. This study contributes significantly on multiple fronts. Firstly, it pioneers empirical investigation of the efficiency on the North Macedonian insurance market, encompassing pre- and post-COVID efficiency metrics. This fills a notable gap in the literature, particularly within the context of emerging European markets. Secondly, our comprehensive approach facilitates a holistic evaluation of the insurance sector’s performance across a five-year span, offering insights into its overarching dynamics and efficacy. Thirdly, the implications of our findings extend to policymakers, regulators, and insurance company management, aiding in informed decision-making and strategic planning. Full article

Corporate governance is gaining interest not only from investors but companies that want to operate in international markets, prompting a more thorough analysis of the field to prioritise stakeholder interests alongside shareholder value. By adopting a holistic approach that considers stakeholders’ diverse needs and expectations, companies can build resilience, foster trust, and create sustainable value for all stakeholders, ensuring long-term success and societal impact. This paper analyses corporate governance principles applied at the international, European, and national levels, emphasising the importance of the field for the stakeholders. The practical approach of the paper analyses the application and compliance of the corporate governance code of 18 companies in the field of financial intermediation and insurance, which are listed on the Bucharest Stock Exchange, underlining the crucial role of transparency of operations in instilling confidence and reassurance in stakeholders. The conclusions present proposals for measures to improve corporate governance practices at the level of companies. Full article

Financial innovation, green investments, or climate change are changing insurers’ business ecosystems, impacting their business behaviour and financial vulnerability. Supervisors and other stakeholders are interested in identifying the path toward deterioration in the insurance company’s financial health as early as possible. Suptech tools enable them to discover more and to intervene in a timely manner. We propose an artificial intelligence approach using Kohonen’s self-organizing maps. The dataset used for development and testing included yearly financial statements with 4058 observations for European composite insurance companies from 2012 to 2021. In a novel manner, the model investigates the behaviour of insurers, looking for similarities. The model forms a map. For the obtained groupings of companies from different geographical origins, a common characteristic was discovered regarding their future financial deterioration. A threshold defined using the solvency capital requirement (SCR) ratio being below 130% for the next year is applied to the map. On the test sample, the model correctly identified on average 86% of problematic companies and 79% of unproblematic companies. Changing the SCR ratio level enables differentiation into multiple map sections. The model does not rely on traditional methods, or the use of the SCR ratio as a dependent variable but looks for similarities in the actual insurer’s financial behaviour. The proposed approach offers grounds for a Suptech tool of predictive generation to support early detection of the possible future financial distress of an insurance company. Full article

The present study is part of the context in which Romania adopted the European Parliament Directive 2007/60/EC on flood risk assessment and management. Therefore, the aim of this research is to assess the risk induced by a hydrological hazard, expressed by a financial value estimation, for the Turcu River in the northern sector of the Bran–Dragoslavele transcarpathian corridor (Romania), an important tourist axis where the pressure on land has increased considerably. As a result, the intra-village areas of Moieciu de Sus, Cheia, Moieciu de Jos, Bran and Tohanu Nou have also expanded into areas vulnerable to flooding. There are currently no studies on the areas potentially affected as well as the extent of the possible damage. For this reason, we proceeded to model the water level corresponding to the maximum flow value with a probability exceeding 1%, using HEC-RAS and ArcGIS software. The results of the implementation of the spatial analysis model resulted in the delineation of the floodplain and the assessment of the potential financial loss related to the minimum market value of the land with the related real estate infrastructures. The research reveals that in the 1% band area (78.7841 ha) with water depth > 0.5 m, more than 433 infrastructures are at high risk of flooding, most of them with high real estate value, i.e., 5.61 km of roads for which a cost of EUR 3,402,666.90 was calculated for restoration. A knowledge of financial vulnerability to flooding becomes important for the community; local authorities involved in making decisions for insuring real estate at risk and planning/managing investments work to prevent/combat the effects of flooding. Full article

The contemporary environment is interrelated, and interactions between markets, countries, and international actors at different levels exist in every corner of the globe. Amid this, the failures of the free-market system have paved the way for institutionalism, which proposes minimising transaction costs, substantial property rights, and enabling proper contract enforcement. Studies on institutions and insurance development spillover concerning growth relationships are rare and a critical area needing exploration. This study explores the behaviour of economic development in terms of potential spatial dependencies and spatial institutional and insurance development spillover on economic growth. To measure insurance development by the life insurance and non-life insurance penetration, economic growth by per capita gross domestic product (GDP), and indicators of good governance for institutions in the nations. The study explored the spatial impact between countries using panel data of 56 countries between 2002 and 2020 representing the Asian and European regions. We did this by using dynamic spatial econometric modelling (DSEM) on institutional and insurance development and seeing the spatial implications and the spatial institutional impact moderated by insurance development on growth. Results indicate that developing the life insurance and non-life insurance of surrounding countries creates a spillover impact on the local countries’ economies. In contrast, institutions have created a reverse spatial spillover impact on local countries. However, life insurance development, moderated through accountability and government effectiveness, has created a spatial spillover between countries. Both life and non-life penetration moderated by the control of corruption and overall institutions have shown a reverse spillover on countries’ economies. This suggests that global governance is a positive-sum game, and monitoring and governance structures have failed at the international level concerning separate countries. Therefore, it is seen that to prevent institutional failure at the state level, good governance and links with the global governance structure could disrupt or energise local institutions. Full article

On 15 March 2022, the European Council reached an agreement on the relevant rules of the Carbon Border Adjustment Mechanism (CBAM). In order to study the impact of the implementation of carbon tariffs on China’s agricultural trade, this paper sets three control groups, namely, economic development, the impact of the “Belt and Road” initiative’s (BRI’s) trade facilitation level, and separate taxation by different countries, and uses the dynamic Global Trade Analysis Project—Environment (GTAP-E) model for policy simulation. The empirical results show that, firstly, carbon tariffs can suppress international demand for agricultural products and increase international market prices. At the same time, under the pressure of carbon tariffs, China will reduce the main agricultural product’s Free on Board (FOB) prices to ensure that their Cost, Insurance and Freight (CIF) prices can maintain a competitive advantage in the international market after increasing the cost of carbon tariffs, and the market share of China’s agricultural products exported to recipient countries will decline. Secondly, China’s “Belt and Road” initiative has a two-way impact on carbon tariff policy. On the one hand, it reduces the negative impact of carbon tariffs through trade facilitation, and on the other hand, it will decrease the effectiveness of carbon emission reduction because of the huge trade demand and encourage countries to develop green and low-carbon agriculture. Finally, there is heterogeneity in the impact of carbon tariffs imposed by the United States, Japan, and Europe on Chinese agricultural trade. Full article

Financial intermediation can be performed by certain types of financial agents or financial brokers in selected European countries. Using primarily analysis and the comparison, the authors focus on certain legal aspects of distribution of financial services in selected Member States of the EU and the EEA, providing a comparative legal analysis. In Slovakia, it is being focused on the subordinate financial agent. The subordinate financial agent is an entrepreneur entitled to perform financial intermediation. The subordinate financial agent belongs under the delegated supervision of the independent financial agent. The paper deals with a consideration de lege ferenda, a change to the relevant legislation according to which the subordinate financial agents could belong to the supervised financial market entities. The authors provide pros and cons regarding the direct supervision of this entity realized by the National Bank of Slovakia. The paper is being prepared by using analysis, synthesis, the inductive method, the deductive method, and the comparative method. When regulating distribution of financial services on the European level, the Insurance Distribution Directive had played a key role. Mainly due to protection of financial consumers, the subordinate financial agent should belong under the direct supervision of the National Bank of Slovakia. Full article

The European financial regulation is evolving with new and specific forms of cooperation for the member states, enhancing concepts and innovative rule of law, particularly featuring the actual level of harmonization. This paper investigates the European deposit insurance scheme, in the context of the European law development, in reply to the current economic and social challenges and in accordance with the principles of the free market. The methods of research include a theoretical investigation of the relevant literature, a comparison of the proposed regulation and regulation in force, synthesis, and deduction. The research results are based on the assessment of the progress of negotiation in building efficient mechanisms to stimulate money saving conduct for individuals and legal persons, globally and within the European Union. Acknowledging the status of the three pillars of the European banking union legislative package, the member states have unanimously agreed that the framework established by the Directive from 2014 needed a bracing approach, to ensure more protection and to support enhanced financial integration. The analysis carried out showed the importance of the European deposit insurance scheme in the context of the present global challenges. The money saving conduct was strongly influenced by the regulation for the deposit guarantee mechanism, while the tight estimated agenda for the final regulatory proposal asks for ingenious cooperation to reach a consensus within members states. The research showed the imperative to build common legislation for the member states and a future direction of investigation to evaluate the effects of the gap between the domestic regulation and milestone generated by the European directives in each state legal framework. Full article

The main aim of this study is to explore the conceptual framework of corporate financial culture and its practical relevance in an emerging Central European market economy, at the level of the Hungarian SME, with a special emphasis on the Hungarian SME sector. In our study, we highlight each dimension of corporate financial culture, focusing on the established corporate financial culture index, and within it, we examine the significance of the financial management elements sub-index and the risk and insurance sub-index separately. In addition, we look for logical, causal, and statistically verifiable relationships between corporate financial literacy and the outcome of corporate financial decisions and corporate risk taking. The relationships were broken down over two years in the analysis. Approximately 2167 responses were included in the 2019 sample and 3281 in the 2021 sample. These representative samples were taken from the Hungarian SME sector and multiple linear regression models were built to find a significant moderation effect of financial literacy between perceived risks and the insurance activity of companies. We conducted our research in two different periods, the unique feature of which is that we conducted a survey before and during the coronavirus crisis, so we could make a comparative analysis. The method used in this research study is a literature review analysis of reference manuscripts, discussing topics related to financial literacy, corporate risk management, and corporate financial management, published in the last 10 years. Our results show that there are positive and significant relationships between company management, corporate risk management, and corporate financial literacy. The results of our study draw the attention of company leaders to the practical significance of financial culture—efficiency, profitability, and stability. Full article

In recent years, there has been a change in the main regulations governing the solvency of the world’s main insurance markets. Sustainability is an issue that is becoming increasingly important among to the various stakeholders in the insurance industry. It is a complex concept that has many different dimensions that can be included in these regulations, allowing for a more sustainable solvency. The paper uses a qualitative model previously designed and tested in the literature to analyse the solvency regulations of the European Union, United States of America, China, Australia, Brazil and South Africa and determine their level of convergence. It also links the criteria set out in these models to the dimensions of sustainability in order to determine the degree of sustainability of solvency systems and the questions that regulators will need to consider in the near future in order to achieve more sustainable solvency. Full article

Due to the rise in the demand for information communication technologies (ICT), the need for operational risk resilience within the European insurance market sector has grown exponentially. This study aims to use the case of blockchain to evaluate whether the five characteristics determined from the literature to be required for effective digital risk resilience (specifically, integration, flexibility, reliability, relevance, and timeliness) have an impact on effectiveness in addressing the requirements of the European Union’s proposed Digital Operational Resilience Act (DORA). To achieve this, we developed a survey with 29 statements, which participants were required to answer using a five-point Likert scale. In total, 513 valid responses were received from participants. These were analyzed using exploratory factor analysis (EFA), confirmatory factor analysis (CFA), and structural equation modeling (SEM). Results show that in the case of blockchain, reliability, flexibility, and relevance were found to significantly relate to its effectiveness in addressing DORA’s requirements, but relationships of effectiveness with integration and timeliness were found to be insignificant. However, when the experience variable was added to the model as the moderator variable, we found that timeliness and relevance have a significant relationship with blockchain effectiveness, while integration, reliability, and flexibility do not. Full article

Despite the potential importance of crime rates in investments, there are no indices dedicated to evaluating the financial impact of crime in the United States. As such, this paper presents an index-based insurance portfolio for crime in the United States by utilizing the financial losses reported by the Federal Bureau of Investigation. The objective of our paper is to introduce new risk hedging financial contracts for crime, consistent with dynamic asset pricing. Underlying the index, we hedge the investments by issuing marketable European call and put options and providing risk budgets. These budgets show that real estate, ransomware, and government impersonation are the main risk contributors in our index. Next, we evaluate the performance of our index via stress testing to determine its resilience to economic crisis. Of all the factors considered in this study, unemployment rate has the potential to demonstrate the highest systemic risk to the portfolio. Our portfolio will help investors envision risk exposure in the market, gauge investment risk based on their desired risk level, and hedge strategies for potential losses due to economic crashes. In conclusion, we provide a basis for the securitization of insurance risk from certain crimes that could forewarn investors to transfer their risk to capital market investors. Full article

The European Directive 2009/138 of Solvency II requires adopting a new approach based on risk, applying a standard formula as a market proxy in which the risk profile of insurers is fundamental. This study focuses on the fire risk sub-module, framed within the man-made catastrophe risk module, for which the regulations require the calculation of the highest concentration of risks that make up the portfolio of an insurance company within a radius of 200 m. However, the regulations do not indicate a specific methodology. This study proposes a procedure consisting of calculating the cluster with the highest risk and identifying this on a map. The results can be applied immediately by any insurance company, covered under the Solvency II regulations, to determine their maximum exposure to the catastrophic man-made risk of fire, instantly providing them with the necessary input for calibration of the solvency capital requirement. Full article

Social protection systems are a key factor for ensuring the long-term sustainability and stability of economies in the European Union, their reform being nowadays present in the political agenda of member states. Aging and the dependence on mandatory levies applied to the employed population on the labor market represent a threat for the sustainability of public social protection systems. In terms of sustainability, our purpose was to highlight the factors influencing social insurance budgets, considering the fiscal policies implemented in six countries of Central and Eastern Europe and their particular labor market characteristics. Therefore, a panel study based on a regression model using the Ordinary Least Squares method (OLS) with cross section random effects was used to determine the correlations between funding sources and labor market specific indicators. The data analyzed led to relevant results that emphasize the dependence of social insurance budgets on positive factors such as the average level of salaries, the share of compulsory social contributions, the unemployment rate, and the human development index, suggesting the continuing need for professional and personal development of the workforce. Full article