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How the Financial Crisis Affects Pensions and Insurance and Why the Impacts Matter

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Author Info

  • Ian Tower
  • Gregorio Impavido

Abstract

This paper discusses the key sources of vulnerabilities for pension plans and insurance companies in light of the global financial crisis of 2008. It also discusses how these institutional investors transit shocks to the rest of the financial sector and economy. The crisis has re-ignited the policy debate on key issues such as: 1) the need for countercyclical funding and solvency rules; 2) the tradeoffs implied in marked based valuation rules; 3) the need to protect contributors towards retirement from excessive market volatility; 4) the need to strengthen group supervision for large complex financial institutions including insurance and pensions; and 5) the need to revisit the resolution and crisis management framework for insurance and pensions.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/151.

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Length: 56
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/151

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Keywords: Asset management; External shocks; Financial institutions; Financial risk; Insurance regulations; Insurance supervision; Latin America; OECD; Private investment; pension; insurance companies; pension plans; life insurance; pension funds; pensions; retirement; insurance company; pension assets; pension fund; life insurers; contractual savings; pension system; mutual funds; pension systems; pension plan; private pension; risk sharing; private pensions; minimum pension; solvency margin; longevity risk; risk management; pension fund returns; life insurance companies; investment risk; non-life insurance; retirement products; investment options; pension liabilities; market risk; insurance markets; capital markets; mutual fund; regulatory framework; private pension plans; implicit pension debt; pension debt; pension asset; retirement savings; cash balances; defined benefit; retirement benefits; mortality tables; pension spending; individual accounts; variable annuity; pension arrangements; pension contributions; pension policies; annuity providers; retirement system; contingent liabilities; insurance regulation; longevity insurance; inflation risk; insurance products; public pension; occupational pension plans; labor force; savings institutions; public pension fund; pension providers; pension fund management; defined benefit plans; portfolios of pension funds; pension schemes; portfolio management; private pension funds; pension market; private pension plan; contractual savings institutions; solvency requirements; provident funds; retirement income; reinsurance companies; pension reform; solvency requirement; deferred annuities; employee retirement; financial intermediation; investment returns; annuity markets; pension benefit; portfolio choices; risk diversification; reinsurance markets; global pension; contribution rate; future mortality improvements; employer pension; financial reporting; cash balance; occupational pension; early retirement; benefit formula; replacement rate; pensioners; risk insurance; contributory pension; corporate pension; pension liability; pension regulator; pension provisions; employer pension plans; mandatory systems; money markets; retirement income security; bond markets; mortgage insurance; collective investment scheme; deposit insurance; supervisory authorities; market risks; life expectancy; pension savings; contributory pensions; intergenerational fairness; asset managers; retirement age; contribution payment; guaranteed rate; retirement product; equity markets; mortality table; minimum income; annual return; insurance entities; pension products; insurance entity; investment risks; risk-free rate; savings for retirement; annuity rates; retirement incomes; pensions policies; funded pensions; defined benefits; guaranteed benefits; pension cost; tax treatment;

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References

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  1. Fiona Stewart, 2007. "Benefit Security Pension Fund Guarantee Schemes," OECD Working Papers on Insurance and Private Pensions 5, OECD Publishing.
  2. Impavido, Gregorio & Thorburn, Craig & Wadsworth, Mike, 2004. "A conceptual framework for retirement products : Risk sharing arrangements between providers and retirees," Policy Research Working Paper Series 3208, The World Bank.
  3. Gregorio Impavido, 2008. "Efficiency and Performance of Bulgarian Private Pensions," IMF Working Papers 08/268, International Monetary Fund.
  4. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Seminar Papers 712, Stockholm University, Institute for International Economic Studies.
  5. Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
  6. Jeannine Bailliu & Helmut Reisen, 1998. "Do funded pensions contribute to higher aggregate savings? A cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(4), pages 692-711, December.
  7. Holzmann, Robert & Palacios, Robert & Zviniene, Asta, 2004. "Implicit pension debt: issues, measurement and scope in international perspective," Social Protection Discussion Papers 30153, The World Bank.
  8. Colin Pugh & Juan Yermo, 2008. "Funding Regulations and Risk Sharing," OECD Working Papers on Insurance and Private Pensions 17, OECD Publishing.
  9. Juan Yermo, 2007. "Reforming the Valuation and Funding of Pension Promises: Are Occupational Pension Plans Safer?," OECD Working Papers on Insurance and Private Pensions 13, OECD Publishing.
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Citations

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Cited by:
  1. Edgardo Cayon & Susan Thorp, 2013. "Financial Autarchy as Contagion Prevention: The Case of Colombian Pension Funds," Research Paper Series 323, Quantitative Finance Research Centre, University of Technology, Sydney.
  2. Michael G Papaioannou & Joonkyu Park & Jukka Pihlman & Han van der Hoorn, 2013. "Procyclical Behavior of Institutional Investors During the Recent Financial Crisis," IMF Working Papers 13/193, International Monetary Fund.
  3. Teresa Bianchi & Gernot Ebner & Raimund Korherr & Eva Ubl, 2011. "The Austrian Insurance Industry in CESEE: Risks and Opportunities from a Financial Stability Point of View," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 22.

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