Conceptual Framework:

The insurance market, due to the nature of its business and its social and economic impact, is a regulated market. An efficient, competitive and reliable market is highly important for the country's development. For this reason, the existence of a modern and efficient regulatory and supervision system is essential, in that it encourages healthy market development and also protects the rights of policyholders.

The SVS’s new focus on solvency supervision involves the focus on cornerstones or levels of supervision developed by the IAIS for insurance (International Association of Insurance Supervisors) and by the Basel Banking Supervision Committee for banks, establishing a basic regulatory level with minimum solvency requirements (level 1) and a complementary supervision level that aims at establishing a risk assessment process for companies with good management principles or practices (level 2). A similar focus on supervision cornerstones is currently being developed by the European Union for insurance supervision in its member countries (Solvency II).

The main objectives of regulation are solvency, which aims to ensure that insurers have sufficient financial resources in order to meet their commitments to policyholders, and market behavior, which seeks to protect the rights of policyholders and the general public, while considering aspects such as fair treatment and transparency in the insurance market, the payment of indemnities and other related benefits.

The main objectives of this new risk-based supervision model are the following: to strengthen the risk management systems of insurance companies, to perform preventive compliance monitoring, to have more flexible regulation with emphasis placed on principles, as well as a supervision system in line with international standards and proper distribution of supervision resources.

Whiter_paper 2006