Solvency Test in Polish Simple Joint-Stock Company: A Review and Comparative Analysis

The subject of the article is a comparative analysis of the solvency test - a legal instrument that conditions causa societatis payments for limited liability companies upon ascertaining their impact on its future liquidity (ability to pay debts as they come due), which has recently been incorporated into the Polish legal system with reference to a simple joint-stock company (pol. Prosta Spółka Akcyjna) (Article 30015 § 5 of Polish Commercial Companies Code). Considering that the solvency test originated in common law, the comparative analysis of the instrument in question was set against the background of selected foreign legal systems, i.e., the law of New Zealand, United States and the United Kingdom, where the solvency test is shaped much differently than the polish one.

A change of paradigm for the insurance industry

In this paper, we review changes in the insurance industry due to new risk-based regulations such as Solvency 2 and Swiss Solvency Test. The move from corporate management based on cash-flow to risk-based management is described and discussed through its consequences on capital management, economic valuation and the internal model. We discuss the limits and difficulties of enterprise risk management and its effect on the organisation of companies and the role of actuaries in insurance. The risk/return relation is becoming a central element of the company’s management slowly supplanting the traditional accounting view.

COMPETITIVE EQUILIBRIA WITH DISTORTION RISK MEASURES

This paper studies optimal risk redistribution between firms, such as banks or insurance companies. The introduction of the Basel II regulation and the Swiss Solvency Test has increased the use of risk measures to evaluate financial or insurance risk. We consider the case where firms use a distortion risk measure (also called dual utility) to evaluate risk. The paper first characterizes all Pareto optimal redistributions. Thereafter, it characterizes all competitive equilibria. It presents three conditions that are jointly sufficient for existence of a unique equilibrium redistribution. This equilibrium's redistribution and prices are provided in closed form via a representative agent.