The Actual Disclosure

This chapter provides an extensive description of the real approach to disclosure, and offers an empirical perspective of the market discipline process in the European insurance industry, in light of the importance assumed by this theme under the regulatory framework on capital requirements for European insurers (Solvency II), as discussed in Chapter 5. It enters into the debate that aims to identify, describe, and emphasise the importance of disclosure, detect the factors that could favour its enhancement, and test its effectiveness, examining both qualitative and quantitative issues. Thus, it provides an in-depth analysis of the actual disclosure, particularly concerning insurance industry, and has six main goals: distinguishing disclosure from certain related topics, namely transparency, communication, market discipline, and reporting, and providing a new and comprehensive definition of disclosure; discussing the importance of disclosure and the call for enhanced information levels, focusing on both economic theory and the contextual factors that emphasise the need for reporting, from existing literature to companies’ incentives, supervisory initiatives, and financial turmoil, both in the insurance industry and the overall financial system; summarising the debate in the existing literature on disclosure practices, distinguishing between seminal and recent studies, for financial and non-financial companies, risk disclosure, readability, determinants and effectiveness, and reporting the results obtained; analysing qualitative and quantitative disclosure, showing whether and how they relate, and selected initiatives for enhancing their extent; describing the content analysis methodology and building a disclosure index that allows to compare the theoretical framework with effective disclosure; providing empirical evidence on disclosure practices for a sample of European insurance companies identified in Section 2.3.