Financial Supervision, Financial Crisis and Life Insurance Companies: International Evidence in OECD Countries

Abstract

This paper is to examine life insurance companies in the OECD countries to identify the major firm-specific determinants of the profitability and test the impact of regulatory system in those countries. We consider two important agency structures of insurance industry supervision and regulations, prudential supervision and business conduct regulation. The agency structure of prudential supervision is significant in OECD countries, but not in Germany and the US. We found that FSA-type excluding Germany and the US may help insurers increase their profitability compared to the companies with Sectoral-type agency structure. Meanwhile, the agency structure of business conduct is also significant in OECD countries on average. It is because the issue of business conduct becomes a socially important issue in Germany and the US so that having FSA may lessen the insurer profitability, especially in Germany.