The implication of Solvency 2 regulation on the performance of the insurance sector. Impact analysis during Covid-19 Crisis.

Abstract

This study attempts to capture the evolution of the performance and risk indicators in the European insurance industry throughout different crises and regulatory regimes. A portfolio management study and regression analysis were conducted with a selected listed insurance company, using market data from 2006 to 2021. This portfolio was designed to reflect the various variations of risk indicators between the insurance market represented by the portfolio and a market benchmark. The study suggests that despite riskier portfolio management indicators overall, no significant changes in market risk has been observed after the implementation of Solvency II from a portfolio management perceptive. The regression analysis also indicates that no significant impact from Solvency II on the portfolio returns was detected, nor any noticeable improvement in terms of systematic risk. This study may be useful to investors who wish to see how comparable regulations might affect a similar industry. Keep in mind, however, that past performance does not guarantee future performance.