Could we rely on market discipline as a substitute for insurance regulation?

Autores
Castagnolo, Fernando; Ferro, Gustavo Adolfo
Año de publicación
2013
Idioma
inglés
Tipo de recurso
artículo
Estado
versión publicada
Descripción
Purpose: The purpose of this paper is to examine empirically whether the market discipline works, and if so, whether it is a complement or substitute of prudential regulation in the insurance markets. Market discipline is intended as “the power of … market forces … to evaluate and control the risky behaviour of the financial institutions”. The authors' formal hypothesis is that if market discipline works as complementary to prudential regulation, the response of the insured is expected to be weaker than if market discipline acts as a substitute to prudential regulation. Design/methodology/approach: The authors designed an experiment examining policy subscription reaction to adjustments in insurers' risk ratings in three different regulatory environments, to compare market discipline in each market. An econometric model was estimated to test the reaction of policy subscription to changes in credit ratings of the insurers. Findings: The findings indicate that more market discipline was exerted in the crisis period, and more intensely where it is intended to replace regulation. A formal hypothesis was tested: in a less regulated environment, consumers' protection rests more heavily on their caution and use of market information about the insurers' financial condition. Research limitations/implications: The research is constrained by the availability and detail of the publicly available data. Practical implications: The results imply that regulation and market discipline work more as complements than as substitutes. Social implications: Market discipline does not replace prudential regulation in the insurance market. Originality/value: The approach presented in the paper adds to precedent work studying comparatively different regulatory environments, and also concerns the response of market discipline in the financial crisis context.
Fil: Castagnolo, Fernando. Citigroup; Reino Unido
Fil: Ferro, Gustavo Adolfo. Universidad Argentina de la Empresa. Facultad de Ciencias Económicas. Instituto de Economía; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
Materia
Regulation
Microeconomic Intervention
Financial Crisis
Credit Ratings
Insurance
Market Discipline
Nivel de accesibilidad
acceso abierto
Condiciones de uso
https://creativecommons.org/licenses/by-nc-sa/2.5/ar/
Repositorio
CONICET Digital (CONICET)
Institución
Consejo Nacional de Investigaciones Científicas y Técnicas
OAI Identificador
oai:ri.conicet.gov.ar:11336/22945

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spelling Could we rely on market discipline as a substitute for insurance regulation?Castagnolo, FernandoFerro, Gustavo AdolfoRegulationMicroeconomic InterventionFinancial CrisisCredit RatingsInsuranceMarket Disciplinehttps://purl.org/becyt/ford/5.2https://purl.org/becyt/ford/5Purpose: The purpose of this paper is to examine empirically whether the market discipline works, and if so, whether it is a complement or substitute of prudential regulation in the insurance markets. Market discipline is intended as “the power of … market forces … to evaluate and control the risky behaviour of the financial institutions”. The authors' formal hypothesis is that if market discipline works as complementary to prudential regulation, the response of the insured is expected to be weaker than if market discipline acts as a substitute to prudential regulation. Design/methodology/approach: The authors designed an experiment examining policy subscription reaction to adjustments in insurers' risk ratings in three different regulatory environments, to compare market discipline in each market. An econometric model was estimated to test the reaction of policy subscription to changes in credit ratings of the insurers. Findings: The findings indicate that more market discipline was exerted in the crisis period, and more intensely where it is intended to replace regulation. A formal hypothesis was tested: in a less regulated environment, consumers' protection rests more heavily on their caution and use of market information about the insurers' financial condition. Research limitations/implications: The research is constrained by the availability and detail of the publicly available data. Practical implications: The results imply that regulation and market discipline work more as complements than as substitutes. Social implications: Market discipline does not replace prudential regulation in the insurance market. Originality/value: The approach presented in the paper adds to precedent work studying comparatively different regulatory environments, and also concerns the response of market discipline in the financial crisis context.Fil: Castagnolo, Fernando. Citigroup; Reino UnidoFil: Ferro, Gustavo Adolfo. Universidad Argentina de la Empresa. Facultad de Ciencias Económicas. Instituto de Economía; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaEmerald Group Publishing Limited2013-02info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionhttp://purl.org/coar/resource_type/c_6501info:ar-repo/semantics/articuloapplication/pdfapplication/pdfhttp://hdl.handle.net/11336/22945Castagnolo, Fernando; Ferro, Gustavo Adolfo; Could we rely on market discipline as a substitute for insurance regulation?; Emerald Group Publishing Limited; Journal of Financial Regulation and Compliance; 21; 1; 2-2013; 4-151358-1988CONICET DigitalCONICETenginfo:eu-repo/semantics/altIdentifier/url/http://www.emeraldinsight.com/doi/abs/10.1108/13581981311297795info:eu-repo/semantics/altIdentifier/doi/10.1108/13581981311297795info:eu-repo/semantics/openAccesshttps://creativecommons.org/licenses/by-nc-sa/2.5/ar/reponame:CONICET Digital (CONICET)instname:Consejo Nacional de Investigaciones Científicas y Técnicas2025-09-03T09:55:50Zoai:ri.conicet.gov.ar:11336/22945instacron:CONICETInstitucionalhttp://ri.conicet.gov.ar/Organismo científico-tecnológicoNo correspondehttp://ri.conicet.gov.ar/oai/requestdasensio@conicet.gov.ar; lcarlino@conicet.gov.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:34982025-09-03 09:55:50.545CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicasfalse
dc.title.none.fl_str_mv Could we rely on market discipline as a substitute for insurance regulation?
title Could we rely on market discipline as a substitute for insurance regulation?
spellingShingle Could we rely on market discipline as a substitute for insurance regulation?
Castagnolo, Fernando
Regulation
Microeconomic Intervention
Financial Crisis
Credit Ratings
Insurance
Market Discipline
title_short Could we rely on market discipline as a substitute for insurance regulation?
title_full Could we rely on market discipline as a substitute for insurance regulation?
title_fullStr Could we rely on market discipline as a substitute for insurance regulation?
title_full_unstemmed Could we rely on market discipline as a substitute for insurance regulation?
title_sort Could we rely on market discipline as a substitute for insurance regulation?
dc.creator.none.fl_str_mv Castagnolo, Fernando
Ferro, Gustavo Adolfo
author Castagnolo, Fernando
author_facet Castagnolo, Fernando
Ferro, Gustavo Adolfo
author_role author
author2 Ferro, Gustavo Adolfo
author2_role author
dc.subject.none.fl_str_mv Regulation
Microeconomic Intervention
Financial Crisis
Credit Ratings
Insurance
Market Discipline
topic Regulation
Microeconomic Intervention
Financial Crisis
Credit Ratings
Insurance
Market Discipline
purl_subject.fl_str_mv https://purl.org/becyt/ford/5.2
https://purl.org/becyt/ford/5
dc.description.none.fl_txt_mv Purpose: The purpose of this paper is to examine empirically whether the market discipline works, and if so, whether it is a complement or substitute of prudential regulation in the insurance markets. Market discipline is intended as “the power of … market forces … to evaluate and control the risky behaviour of the financial institutions”. The authors' formal hypothesis is that if market discipline works as complementary to prudential regulation, the response of the insured is expected to be weaker than if market discipline acts as a substitute to prudential regulation. Design/methodology/approach: The authors designed an experiment examining policy subscription reaction to adjustments in insurers' risk ratings in three different regulatory environments, to compare market discipline in each market. An econometric model was estimated to test the reaction of policy subscription to changes in credit ratings of the insurers. Findings: The findings indicate that more market discipline was exerted in the crisis period, and more intensely where it is intended to replace regulation. A formal hypothesis was tested: in a less regulated environment, consumers' protection rests more heavily on their caution and use of market information about the insurers' financial condition. Research limitations/implications: The research is constrained by the availability and detail of the publicly available data. Practical implications: The results imply that regulation and market discipline work more as complements than as substitutes. Social implications: Market discipline does not replace prudential regulation in the insurance market. Originality/value: The approach presented in the paper adds to precedent work studying comparatively different regulatory environments, and also concerns the response of market discipline in the financial crisis context.
Fil: Castagnolo, Fernando. Citigroup; Reino Unido
Fil: Ferro, Gustavo Adolfo. Universidad Argentina de la Empresa. Facultad de Ciencias Económicas. Instituto de Economía; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; Argentina
description Purpose: The purpose of this paper is to examine empirically whether the market discipline works, and if so, whether it is a complement or substitute of prudential regulation in the insurance markets. Market discipline is intended as “the power of … market forces … to evaluate and control the risky behaviour of the financial institutions”. The authors' formal hypothesis is that if market discipline works as complementary to prudential regulation, the response of the insured is expected to be weaker than if market discipline acts as a substitute to prudential regulation. Design/methodology/approach: The authors designed an experiment examining policy subscription reaction to adjustments in insurers' risk ratings in three different regulatory environments, to compare market discipline in each market. An econometric model was estimated to test the reaction of policy subscription to changes in credit ratings of the insurers. Findings: The findings indicate that more market discipline was exerted in the crisis period, and more intensely where it is intended to replace regulation. A formal hypothesis was tested: in a less regulated environment, consumers' protection rests more heavily on their caution and use of market information about the insurers' financial condition. Research limitations/implications: The research is constrained by the availability and detail of the publicly available data. Practical implications: The results imply that regulation and market discipline work more as complements than as substitutes. Social implications: Market discipline does not replace prudential regulation in the insurance market. Originality/value: The approach presented in the paper adds to precedent work studying comparatively different regulatory environments, and also concerns the response of market discipline in the financial crisis context.
publishDate 2013
dc.date.none.fl_str_mv 2013-02
dc.type.none.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
http://purl.org/coar/resource_type/c_6501
info:ar-repo/semantics/articulo
format article
status_str publishedVersion
dc.identifier.none.fl_str_mv http://hdl.handle.net/11336/22945
Castagnolo, Fernando; Ferro, Gustavo Adolfo; Could we rely on market discipline as a substitute for insurance regulation?; Emerald Group Publishing Limited; Journal of Financial Regulation and Compliance; 21; 1; 2-2013; 4-15
1358-1988
CONICET Digital
CONICET
url http://hdl.handle.net/11336/22945
identifier_str_mv Castagnolo, Fernando; Ferro, Gustavo Adolfo; Could we rely on market discipline as a substitute for insurance regulation?; Emerald Group Publishing Limited; Journal of Financial Regulation and Compliance; 21; 1; 2-2013; 4-15
1358-1988
CONICET Digital
CONICET
dc.language.none.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv info:eu-repo/semantics/altIdentifier/url/http://www.emeraldinsight.com/doi/abs/10.1108/13581981311297795
info:eu-repo/semantics/altIdentifier/doi/10.1108/13581981311297795
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
https://creativecommons.org/licenses/by-nc-sa/2.5/ar/
eu_rights_str_mv openAccess
rights_invalid_str_mv https://creativecommons.org/licenses/by-nc-sa/2.5/ar/
dc.format.none.fl_str_mv application/pdf
application/pdf
dc.publisher.none.fl_str_mv Emerald Group Publishing Limited
publisher.none.fl_str_mv Emerald Group Publishing Limited
dc.source.none.fl_str_mv reponame:CONICET Digital (CONICET)
instname:Consejo Nacional de Investigaciones Científicas y Técnicas
reponame_str CONICET Digital (CONICET)
collection CONICET Digital (CONICET)
instname_str Consejo Nacional de Investigaciones Científicas y Técnicas
repository.name.fl_str_mv CONICET Digital (CONICET) - Consejo Nacional de Investigaciones Científicas y Técnicas
repository.mail.fl_str_mv dasensio@conicet.gov.ar; lcarlino@conicet.gov.ar
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