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on Insurance Economics |
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Issue of 2016‒09‒11
thirteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper provides an update on the German insurance sector and an analysis of certain key aspects of the regulatory and supervisory regime. It includes an analysis of German practice in relation to selected Insurance Core Principles in the context of a wider discussion of key issues in regulation and supervision. This technical note focuses mainly on recent developments in the sector and key vulnerabilities, including life insurance issues, those vulnerabilities associated with the continuing low interest rate environment; the preparations of the authorities and industry for the implementation of the Solvency II requirements; and the supervisory approach to large insurance groups. |
| Keywords: | Financial Sector Assessment Program;Insurance;Insurance supervision;Insurance regulations;Risk management;Germany; |
| Date: | 2016–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/192&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper provides an assessment of the insurance sector in the United Kingdom. The United Kingdom has one of the deepest, most developed insurance markets in the world. Insurance penetration is 50 percent higher than in the European Union or other advanced economies, and the expenditure per capita in insurance amounts to US$5,429 as compared with US$3,815 in the advanced economies. The supervisory approach of both the Prudential Regulation Authority and the Financial Conduct Authority (FCA) are forward-looking and risk-based. However, improved data availability and an enhanced risk appetite statement are required. Notwithstanding stronger enforcement on supervisory and enforcement actions, important challenges still need to be addressed by the FCA. |
| Keywords: | Europe;United Kingdom;insurance, risk, insurers, solvency, life insurance |
| Date: | 2016–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/158&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper assesses Germany’s financial system and, in particular, its potential for spillover risk. The analysis comprises structural and financial statement analyses, detailed stress tests for banks and insurance companies, and spillover risk analysis. Solvency and liquidity stress tests cover all 1,776 banks operating in Germany, and insurance-sector analysis covers 93 percent of the life insurance sector in terms of the assets. Germany is highly interconnected through trade and financial channels. The total consolidated claims of German banks on foreign banks, nonbank private sector, and public sector stood at about $1.7 trillion in the second quarter of 2015, with the majority of cross-border exposures vis-Ã -vis France, Italy, the United Kingdom, and the United States. |
| Keywords: | Financial Sector Assessment Program;Banking sector;Liquidity;Credit risk;Insurance;Stress testing;Risk management;Germany; |
| Date: | 2016–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/191&r=ias |
| By: | Gerard, Francois; Gonzaga, Gustavo |
| Abstract: | It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs -- transfer and social insurance programs -- in developing countries. We evaluate such claims for policies that have been heavily studied in countries with low informality -- increases in unemployment insurance (UI) benefits. We introduce informal work opportunities into a canonical model of optimal UI that specifies the typical tradeoff between workers' need for insurance and the efficiency cost from distorting their incentives to return to a formal job. We then combine the model with evidence drawn from comprehensive administrative data to quantify the efficiency cost of increases in potential UI duration in Brazil. We find evidence of behavioral responses to UI incentives, including informality responses. However, because reemployment rates in the formal sector are low to begin with, most beneficiaries would draw the UI benefits absent behavioral responses, and only a fraction of the cost of (longer) UI benefits is due to perverse incentive effects. As a result, the efficiency cost is relatively low, and in fact lower than comparable estimates for the US. We reinforce this finding by showing that the efficiency cost is also lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are even lower in those labor markets absent behavioral responses. In sum, the results go against the conventional wisdom, and indicate that efficiency concerns may even become more relevant as an economy formalizes. |
| Keywords: | Informality; Unemployment insurance |
| JEL: | H00 J65 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11485&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper first describes the architecture for resolution and crisis management. Second, it outlines the resolution policies and operational arrangements currently in place. Third, it discusses the measures taken by the authorities to ensure resolvability. Fourth, it refers to cross-border cooperation issues in resolution. Finally, it describes frameworks for resolution funding and deposit insurance. The U.K. financial safety net is underpinned by strong institutional arrangements. The financial safety net is made up of Her Majesty's Treasury, the Bank of England, the Prudential Regulation Authority, the Financial Conduct Authority, and the Financial Services Compensation Scheme. The authorities are encouraged to continue their efforts to operationalize, test, and refine the crisis preparedness framework, while exploring mechanisms to make it even more robust. |
| Keywords: | United Kingdom;financial stability, deposit, insurance, financial system, deposit insurance |
| Date: | 2016–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/155&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper summarizes the assessment of interconnectedness and systemic risk undertaken for the U.K. financial system as part of the Financial Sector Assessment Program. It consists of three parts, focusing on the following: (1) motivation for monitoring cross-sector interconnectedness as part of the financial system’s resilience assessment, (2) description of selected empirical methods that may be employed to analyze interconnectedness, and (3) an illustrative analysis conducted, based on a definition of the financial system that incorporates U.K. banking and life insurance sectors. The assessment of financial system resilience should account for the evolution of interconnectedness between firms and sectors. |
| Keywords: | United Kingdom;Europe;banks, risk, banking, insurance, systemic risk |
| Date: | 2016–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/164&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper discusses key findings of the Financial System Stability Assessment for Ireland. The Irish financial system has strengthened significantly since the crisis and undergone major structural changes. Important vulnerabilities in the banking system relate to the real-estate sector, some parts of the corporate sector, the sovereign, and funding in pound sterling. Pockets of weakness remain, notably among highly leveraged households and smaller domestic firms. Over the medium term, technological innovations and shifts in competitive pressures will throw up challenges to the profitability of both banks and nonbank financial institutions. The U.K. vote to leave the EU is also very likely to have negative effects on the Irish financial system. |
| Keywords: | Financial system stability assessment;Financial sector;Banks;Bank resolution;Stress testing;Securities markets;Insurance;Pensions;Financial safety nets;Macroprudential Policy;Economic indicators;Financial soundness indicators;Financial stability;Ireland; |
| Date: | 2016–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/258&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper discusses key findings of the Financial System Stability Assessment of Russian Federation. The Russian banking system is weak and likely to need additional capital. Even in the baseline scenario, certain banks will need new capital owing to low profitability and increasing credit losses. The required resources increase in the stress scenarios, but remain manageable. Bank regulation and supervision have greatly improved in recent years, but there is more to be done. Key areas for improvement include related party lending, country and transfer risks, operational risks, and supervisory interactions with external auditors. In addition, the implementation of risk-based supervision is also in progress. |
| Keywords: | Financial system stability assessment;Economic recession;Banking sector;Liquidity management;Stress testing;Bank supervision;Bank regulations;Anti-money laundering;Combating the financing of terrorism;Macroprudential Policy;Capital markets;Insurance;Economic indicators;Russian Federation; |
| Date: | 2016–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/231&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper provides assessment of the crisis preparedness and management framework of Montenegro. The banking sector dominates the financial system and accounts for about 90 percent of financial system assets, equivalent to about 93 percent of GDP as of June 2015. In 2010 the Financial Stability Council (FSC) was established to maintain financial system stability and avoid financial distress. FSC members are the Central Bank of Montenegro (CBM) governor (chair), the minister of finance, the president of the Insurance Supervision Agency Council, and the Securities and Exchange Commission president. The CBM functions as the de facto resolution authority for banks. |
| Keywords: | Financial Sector Assessment Program;Banking sector;Liquidity;Bank resolution;Deposit insurance;Risk premium;Risk management;Montenegro; |
| Date: | 2016–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/199&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper provides a review of the liquidity provision framework and recent developments in the United Kingdom. The Bank of England’s (BoE’s) Sterling Monetary Framework is the mechanism used in the United Kingdom to direct liquidity provision. The BoE’s relatively wide-ranging and accessible liquidity insurance framework raises three key questions and four other issues relevant to financial stability. The quantification of implications of the liquidity framework for the BoE balance sheet is still a work in progress. Safeguards are generally sufficient, although the BoE should ensure that lower level of supervisory scrutiny directed at small- and medium-sized enterprises does not adversely impact its horizon-scanning for firms at risk of requiring liquidity support. |
| Keywords: | Financial Sector Assessment Program;Central banks;Liquidity;Insurance;Monetary policy;Financial stability;Risk management;United Kingdom;liquidity, insurance, market, monetary fund, future |
| Date: | 2016–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/159&r=ias |
| By: | Thu Trang Vuong; Ha Nguyen; Quan-Hoang Vuong |
| Abstract: | In this research, we use a survey dataset from 900 Vietnamese patients, of which 605 have health insurance, to establish empirical relations between medical expenditures, actual insurance coverage rate, residency status, socioeconomic status of patients and their perceived dis/satisfaction toward the health insurance services/values. The results show that actual insurance coverage and medical expenditures contribute to higher probabilities of satisfaction, but with coverage rate having much higher influence. In addition, threshold insurance coverage and expenditures are estimated, showing that perceptions are immensely heterogeneous regarding values of benefits, following which the poor and non-resident patients being those most efficient for the healthcare system to target and demonstrate positive policy changes. This group's threshold coverage is only 63.4%, a little above the current mean 58%. Finally, as the universal insurance and full coverage is impossible, Vietnamese health insurance policy should switch to support the most vulnerable, with more flexible health insurance and financing options as the current system has proved too rigid to be of value to the poor. |
| Keywords: | health insurance; threshold; medical expenditures; healthcare policy; Vietnam |
| JEL: | I18 I10 |
| Date: | 2016–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/235516&r=ias |
| By: | Pragyan Deb |
| Abstract: | This paper studies banks' decision to form financial interconnections using a model of financial contagion that explicitly takes into account the crisis state of the world. This allows us to model the network formation decision as optimising behaviour of competitive banks, where they balance the benefits of forming interbank linkages against the cost of contagion. We use this framework to study various market frictions that can result in excessive interconnectedness that was seen during the crisis. In this paper, we focus on two channels that arise from regulatory intervention—deposit insurance and the too big to fail problem. |
| Keywords: | Banks;Interconnectedness;Financial contagion;Financial crises;Deposit insurance;Systemically important financial institutions;Too-big-to-fail;Econometric models;Contagion, network formation, financial crises, deposit insurance, too-big-to-fail. |
| Date: | 2016–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:16/180&r=ias |
| By: | International Monetary Fund. Monetary and Capital Markets Department |
| Abstract: | This paper evaluates the risks and vulnerabilities of the German financial system and reviews both the German regulatory and supervisory framework and implementation of the common European framework insofar as it is relevant for Germany. The country is home to two global systemically important financial institutions, Deutsche Bank AG and Allianz SE. The system is also very heterogeneous, with a range of business models and a large number of smaller banks and insurers. The regulatory landscape has changed profoundly with strengthened solvency and liquidity regulations for banks (the EU Capital Requirements Regulation and Directive IV), and the introduction of macroprudential tools. |
| Keywords: | Financial system stability assessment;Economic growth;Financial sector;Banks;Insurance;Financial risk;Spillovers;Stress testing;Bank supervision;Financial safety nets;Economic indicators;Financial soundness indicators;Reports on the Observance of Standards and Codes;Germany; |
| Date: | 2016–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/189&r=ias |