infonet-economy

The purpose of this article is a qualitative economic impact assessment of the Solvency II proposals. In a first step, we elaborate the economic foundations of insurance market regulation. Based on three sources of market failure, we derive economic objectives of regulatory intervention. In our impact analysis we e-xamine to what extent the proposed Solvency II rules will be able to achieve these objectives. The rules pro-posed in the Solvency II project will alleviate economic effects of market distortions to a certain degree, but further analysis is necessary. This paper elaborates a need for further analysis of regulatory measures and offers valuable insights into the obligatory impact as-sessment of the new Solvency II rules. Our analysis finds that the impact of a minimum solvency capital on insurance market competition needs further examinati-on. Furthermore, the economic justification for insu-rance market regulation needs to be evaluated in de-tail.