ABSTRACT
The insurance sector is moving from a system of direct supervisory control to a more deregulated environment. This step requires new systems of risk control and risk management. The supervisors also need new and improved techniques to control the insurance companies. As these institutions are also large and major investors, their soundness has a clear impact on the financial market. The key benchmark of an insurance business is its
solvency
or its
financial strength
. Other terms that have been used are
financial health
or
solidity
. The main liabilities of an insurance undertaking are its anticipated insur-
ance claims and associated costs. These are usually calculated using actuarial methods, guided by regulations. These calculations are, of course, only estimates, with some probability of error.
