It is organised around three pillars: a first pillar setting quantitative solvency requirements covering all aspects of insurance business, including asset risks and prescribing eligible forms of capital. The second pillar is aimed at qualitative requirements concerning risk management and governance standards. And a third pillar is designed to encourage market discipline by requiring a high level of transparency and disclosure from regulated firms.
The path of economic and financial development of the modern economies is, however, littered with episodes of excess, speculative bubbles and failures linked to highly imprudent if not criminal practices.