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The Political Economy of Regulating Social Services of General Interest: a Case Study of Longevity Insurance in the EU

Waltraud Schelkle

The relationship between the EU's regulation of insurance markets and of social security is not well understood.My paper is an attempt at closing this research gap by analysing how insurance is made a financial service or asocial service as a result of insurance regulation instead of taking this distinction as a given. I take the case studyof longevity insurance, ie pensions and annuities. This reveals some startling features, such as the cross-over ofsocial regulation to commercial insurance, competition norms to social security, and the paradox of 'reregulationfor deregulation'. These findings arguably result from three interrelated challenges. First, insurance challenges theEU's regulatory approach of furthering welfare-enhancing competition by combating market and governmentfailure. Competition cannot be the outright maxim of insurance regulation as it tends to undermine risk pooling.Closely related is the second challenge, namely of the EU's political strategy to stay away from conspicuouslyredistributive policy issues so as to minimize conflict. But the regulation of insurers' risk pooling can hardly avoidmaking decisions about ex ante identifiable groups who are likely to benefit or lose from the pooling. Finally, in thevarious member states private insurance is to different degrees functionally and normatively intertwined withpublic schemes. Hence, the regulation of markets tends to transgress into social policy for which the EU has noestablished competence. The paper concludes with some general reflections on how market regulation relates tosocial policy.

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