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Log out of ReadCube. The introduction of the Solvency II insurance company regulatory regime is based on a flawed application of scientific ideas to areas to which they are simply not applicable. The new regime will endanger the solvency of the insurance industry in the long run. Volume 29 , Issue 2. The full text of this article hosted at iucr. If you do not receive an email within 10 minutes, your email address may not be registered, and you may need to create a new Wiley Online Library account.
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Search for more papers by this author. Tools Request permission Export citation Add to favorites Track citation. Share Give access Share full text access. Share full text access. This is normally due to the efforts of powerful interest groups — such as auditors, investment banks, stock market speculators, and so on.
When models become fashions and an attempt is made to implement them using the force of law, frequently their lack of a scientific basis has already been demonstrated, though the disconcerted majority of citizens remain unaware of the fact.
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To be specific, these new developments are based on neoclassical finance theory, which began to emerge in the second half of the last century and which, due to its static nature, its formal reductionism, the unrealistic nature of its assumptions, and its erroneous conception of market functioning, has now fallen into discredit. This hypothesis serves as the rationale for the assumption of constancy, and for the belief that information from the past can be extrapolated to the future in the form of predictable, constant probability scenarios and distributions which can and must guide the action of economic agents.
However, these assumptions are erroneous and not scientifically grounded Huerta de Soto The market in general, and financial markets in particular, are dynamic processes of entrepreneurial creativity and coordination in which entrepreneurs make daily discoveries of new profit opportunities, that is, hitherto unnoticed opportunities to improve things for consumers. The confusion between the concepts of risk and uncertainty Particularly disturbing is the grave confusion implicit in Solvency II between the concepts of risk and uncertainty. Furthermore, this confusion is distinctly paradoxical, because if there is a sector in which the difference between risk insurable and uncertainty uninsurable should always be very clear, it is the insurance sector.
Historical sequences are extrapolated to the future in the form of probability scenarios and distributions which are presumed to be known, quantifiable, and constant.
A Treatise on Political Economy - Online Library of Liberty
In the following table, which we will comment on afterward, we offer as a reminder a summary of the essential differences between risk and uncertainty Huerta de Soto , Class probability: The behaviour 1. Action itself brings about or creates the event. A situation of insurable risk 2. Permanent uncertainty exists, exists for the whole class. Thus uncertainty is not insurable. Probability can be expressed in 3. Probability cannot be expressed in mathematical terms.
Probability is gauged through 4. It is discovered through insight logic and empirical research. It is an object of research to 5. A concept typically used by the the natural scientist. Examples are the risk of death per age group as listed in a mortality table, the number of homes with certain characteristics that catch fire each year, the frequency and average cost of traffic accidents. Be the first to write a review.
Add to Wishlist. Ships in 15 business days. Link Either by signing into your account or linking your membership details before your order is placed. Description Table of Contents Product Details Click on the cover image above to read some pages of this book! Part I Basics: 1. Harmonization of Insurance Supervisory Law.
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- Treatises on Solvency II.
Supervisory Review Process. Insurance Supervisory Law and Consumer Protection. Solvency Requirements. Own Risk and Solvency Assessment. Fitness of Members of Supervisory Board. Definition and Holders of Key Functions.
Supervisory Review of Key Functions.