The objective of prudential regulation and its role in the allocation of life insurance companies' savings: going beyond Solvency II with a "risk-return" approach

Summary This thesis analyzes the origins and objectives of prudential regulation of insurance investments and its role in the allocation of insurers' savings. It is divided into three parts. The first part explains the importance of the insurance industry for the management of global savings and provides an understanding of the need for, nature of, and evolution of insurance solvency principles. These prudential norms were always developed with one objective in mind - to prevent failure by carefully measuring and controlling "risk. The second part deals with the negative role of these "single-factor" solvency standards on the allocation of savings. This historical analysis allows us to characterize capitalization as a source of motivation for investment reallocation and to examine the situation in this context in Europe before the introduction of Solvency II. The third part proposes a new theoretical framework for analyzing prudential investment regulation and explains theoretically why "single-factor" solvency standards influence insurers' investment policies. This final section proposes a new approach to investment regulation that has two objectives - risk control and optimal return. Based on the "two-factor" approach, we propose changes for Solvency II.