Portfolio regulation of life insurance companies and pension funds

This paper examines the rationale, nature and financial consequences of two alternative approaches to portfolio regulations for the long-term institutional investor sectors life insurance and pension funds. These approaches are, respectively, prudent person rules and quantitative portfolio restrictions. The argument draws on the financial-economics of investment, the differing characteristics of institutions’ liabilities, and the overall case for regulation of financial institutions. Among the conclusions are: · regulation of life insurance and pensions need not be identical; · prudent person rules are superior to quantitative restrictions for pension funds except in certain specific circumstances (which may arise notably in emerging market economies), and; · although in general restrictions may be less damaging for life insurance than for pension funds, prudent person rules may nevertheless be desirable in certain cases also for this sector, particularly in competitive life sectors in advanced countries, and for pension contracts offered by life insurance companies. These results have implications inter alia for an appropriate strategy of liberalisation. 1 The author is Professor of Economics and Finance, Brunel University, Uxbridge, Middlesex UB3 4PH, United Kingdom (e-mail ‘[email protected]’, website: ‘www.geocities.com/e_philip_davis’). He is also a Visiting Fellow at the National Institute of Economic and Social Research, an Associate Member of the Financial Markets Group at LSE, Associate Fellow of the Royal Institute of International Affairs and Research Fellow of the Pensions Institute at Birkbeck College, London. Work on this topic was commissioned by the OECD. Earlier versions of this paper were presented at the XI ASSAL Conference on Insurance Regulation and Supervision in Latin America, Oaxaca, Mexico, 4-8 September 2000, and at the OECD Insurance Committee on 30 November 2000. The author thanks participants at the conference and A Laboul for helpful comments. Views expressed are those of the author and not necessarily those of the institutions to which he is affiliated, nor those of the OECD. This paper draws on Davis and Steil (2000)

International Research Project on Job Retention and Return to Work Strategies for Disabled Workers: Key Issues

[From Preface] The International Research Project on Job Retention and Return to Work Strategies for Disabled Workers breaks new ground by examining the inter-relationships of public and enterprise policies and practices as they affect the retention and return to work of disabled workers. The enquiry encompasses public policies to promote employment of disabled people; benefit and compensation programmes; employment support and rehabilitation services; provision to adapt work and workplace; and measures developed and implemented by the enterprise. The Project aims not only to identify successful policies and practices which are transferable from one country to another but also to inform the development of effective, efficient and equitable job retention and return to work strategies for disabled workers. The ultimate objective is to develop strategies which can be put into effect in the workplace

Financial integration within the European Union: Towards a single market for insurance

Our study analyses the extent of integration of the EU market for life and non-life insurance. The main integration indicator used is the market share (premium based) of foreign companies in domestic markets. For the calculation of this indicator, three different kinds of foreign presence are taken into account: foreign presence through merger and acquisitions, through branches and agencies and direct cross-border sales without physical presence. Whereas the static view reveals a high degree of national fragmentation the dynamic view indicates advancing integration. The results also show that integration is even less advanced for life than for non-life insurance and that mergers and acquisitions are the dominant strategy to access a foreign market. Besides summarising the liberalisation history of the European insurance sector and discussing consumer benefits from further integration, the study contributes to a better understanding of obstacles to insurance market integration.European Financial Integration; Insurance Sector; Internal Market

Risk-based supervision of pension funds : a review of international experience and preliminary assessment of the first outcomes

This paper provides a review of the design and experience of risk-based pension fund supervision in several countries that have been leaders in the development of these methods. The utilization of risk-based methods originates primarily in the supervision of banks. In recent years it has increasingly been extended to other types of financial intermediaries including pension funds and insurers. The trend toward risk-based supervision of pensions is closely associated with movement toward the integration of pension supervision with that of banking and other financial services into a single national authority. Although similar in concept to the techniques developed in banking, the application to pension funds has required modifications, particularly for defined contribution funds that transfer investment risk to fund members. The countries examined provide a range of experiences that illustrate both the diversity of pension systems and approaches to risk-based supervision, but also a commonality of the focus on sound risk management and effective supervisory outcomes. The paper provides a description of pension supervision in Australia, Denmark, Mexico and the Netherlands, and an initial evaluation of the results achieved in relation to the underlying objectives.Debt Markets,,Insurance&Risk Mitigation,Emerging Markets,Banks&Banking Reform

Food calamities and governance; an inventory of approaches

In normal circumstances a governance structure of the food system has evolved that serves the system so as to reduce transaction costs. While its overarching conditions are often set by the government policy as to the sector, the private sector, with the help of an enabling government, has developed arrangements to its own liking. The question addressed in this review is whether this governance structure of the food system is robust enough to cover extreme events, calamities, that strike unexpectedly and may harm large sections of the system. Do normal arrangements cover part of what should be done in these circumstances, or do they perhaps hinder the application of adequate governance fit for such extreme events

Harnessing Health Care Markets for the Public Interest: Insights for U.S. Health Reform From the German and Dutch Multipayer Systems

Outlines how the German and Dutch systems offer universal coverage via competing insurance plans and promote effective and efficient care. Highlights insurance exchanges, multipayer policies and group purchasing, information systems, and public reporting

"Regulating Healthcare Technologies and Medical Supplies: A Comparative Overview"

A complex relationship exists among EU regulations, current national practices and rules, institutional capacities to implement regulatory adjustments and the legacy of past health and regulatory policy and traditions. However, there is little empirical information on medical devices policy, the medical devices industry, and the assurance of medical device safety and usage. Drawing on a review of the secondary literature and on-going field work, the evidence suggests that the current mix of statecentric and self-regulatory traditions will be as important in determining the implementation and final outcomes of EU-rules as the new rules themselves. EU directives redesign rules, but they do not necessarily lead to institutional change, create institutional capacities, or alter old practices in the short term. Neither EU directives nor national regulatory adjustments determine the "man-machine/skill-experience" interface which is shaped and influenced by local medical traditions and the acceptance of these traditions by local publics