Insurance: a regulated sector with oversight to ensure its proper functioning and transparency

In every country, economic actors are subject to public oversight to ensure they operate responsibly. The insurance sector, in particular, is one of the most closely supervised industries worldwide, subject to extensive regulation due to its nature and its impact on the broader economy.  

Insurance companies operate under the close scrutiny of various authorities tasked with safeguarding the rights of policyholders, insured parties, and beneficiaries. Their activity is supported by a robust technical and legal framework designed to ensure proper functioning and promote transparency across the sector.  

Supervisory bodies 

The stability of the insurance sector is due, in large part, to the strength of the regulatory and supervisory bodies that oversee its operation. Across the globe, these authorities ensure that insurance companies comply with current legislation and adhere to sound business practices.  

In Spain, for example, this responsibility lies with the Directorate-General for Insurance and Pension Funds. Its key duties include reviewing documentation submitted by insurance and reinsurance companies, brokers of insurance and reinsurance, and pension fund managers to monitor their solvency and operational conduct. 

The Spanish insurance market is governed by a range of regulations covering insurance contracts, the organization, supervision, and solvency of companies, as well as specific rules for mutual provident societies and extraordinary risk insurance.  

The European framework 

After many lengthy debates, Solvency II was implemented in Europe. This important regulatory framework is aimed at improving risk management and the solvency of insurance companies, and it is periodically reviewed to adapt to technological and economic changes.  

Its implementation introduced strict standards for insurance companies operating within the EU, focusing on three key pillars: 

• Capital requirements: these reflect the risks to which insurers are exposed, ensuring that they hold sufficient capital to meet their obligations while also maintaining financial stability.  

• Internal supervision: this refers to the implementation of effective and adequate internal systems for risk management and corporate governance.  

• Transparency: advocates for detailed and transparent disclosure of insurers’ financial and risk-related information, enabling both regulators and consumers to gain a clearer understanding of the companies’ standing.  

In this geographical area, it is also important to highlight the role of the European Insurance and Occupational Pensions Authority (EIOPA), an independent body that advises the European Commission, the European Parliament, and the Council of the European Union. EIOPA contributes to protecting policyholders as well as members and beneficiaries of pension schemes by promoting transparency and effective, consistent, and high-quality supervision of insurance and occupational pensions across the EU. 

International oversight  

In Latin America, the organization of supervisory and regulatory work is similar. In Mexico, this responsibility lies with the National Insurance and Finance Commission; in Argentina, the Superintendence of Insurance of the Nation; in Colombia, the Financial Superintendence; in Chile, the Property & Casualty Supervision Unit; and in Peru, the Superintendence of Banking, Insurance, and AFP.  

Their duties are very similar across these countries: to carry out inspection and oversight of insurance companies in accordance with their respective legislation. Many of these bodies are members of the Association of Latin American Insurance Supervisors (ASSAL).  

Another key player shaping the global insurance supervision landscape is the International Association of Insurance Supervisors (IAIS). This organization develops harmonized frameworks for the supervision of large international insurance groups, aiming to protect policyholders and maintain global financial stability. Its membership includes insurance supervisors from over 200 jurisdictions.  

In 2020, MAPFRE was designated as an Internationally Active Insurance Group (IAIG) and is the only Spanish insurance company, alongside global industry giants, to comply with the solvency requirements set forth by this association’s new regulatory standards. 

Oversight yes, over-regulation no. 

It is clear that good regulation is effective and essential for the optimal functioning of insurance. However, when regulation becomes excessive, it produces the opposite effect: aversion and confusion.  

The Club de Aseguradores Internacionales (The International Insurance Company Society) states that the industry is currently facing unprecedented over-regulation, forcing companies to dedicate vast resources to complying with regulations imposed by various jurisdictions.    

Taking Spain as an example, data from UNESPA shows that the number of regulations affecting the industry has increased fivefold in the last five years, from 12 to nearly 70, directly or indirectly impacting insurance. This represents a significant challenge for insurers. The Spanish insurance association argues that simplifying regulatory models would benefit everyone—both companies and customers alike. 

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