Policies and Regulations to Promote the Long

Report
APFF
ASIA-PACIFIC FINANCIAL FORUM
ASIA-PACIFIC FINANCIAL FORUM
INSURANCE AND RETIREMENT INCOME WORKSTREAM
Policies and Regulations to Promote the Longterm Business Roles of Insurance and Pensions
and the Development of Retirement Systems
Seattle, July 7 2014
Makoto (Mack) Okubo 大久保 亮
Nippon Life Insurance Company
1
APFF Insurance and Retirement Income Workstream
• To help develop policies/regulations to support long-term
business roles of insurance and pensions and
development of retirement systems
– Helping to develop policy and regulatory frameworks that
will enable insurers and pension funds to:
• effectively provide long-term funding;
• support financial stability and economic and
infrastructure development and;
• serve the needs of aging society
– Seeking to help in identifying and addressing regulatory,
accounting, market and operational issues that constrain
insurers and pension funds from playing these roles
– Participants include experts from the insurance, pensions
and financial sector, academics, regulators and regional and
international organizations
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Regulatory issues
 Economic-based regime should
have a long-term vision
 If a short-term-minded economic
regime were implemented



Significant volatility for long term products
Driven to transfer risks over to customers
(Photo
– Santiago,
(Source
– APECChile)
Seattle)
Refrain from investing in non-fixed income assets
 Unintended consequences might
occur if banking regulations were
copied for insurers



Insurers play an important role as long
term investors
Life insurers play an increasing role in
the social security system
Diversity needed to support a sound
development of the environment
(Photo – Sydney, Australia)
3
Regulatory Issues (cont.)
 “One-size-fits-all” models would not work
 Different business models by jurisdiction



Consumers’ risk preference
Expected roles of the insurers
State of development of financial markets
Investment-type products
Protection-type products
Mortality risk
Longevity risk
4
Accounting issues
 Volatility in the balance sheet



Assets-liabilities interaction should be reflected
for a wide range of participating contracts sold in
the Asia Pacific region
Discount rate should reflect the business model
Short-term fluctuation should be avoided
 Volatility in the income statement

The (optional) use of OCI for insurance liabilities
and corresponding assets
(Photo – Buenos Aires, Argentina)
 The proposed IFRS contains other significant issues
for traditional long-duration products (i.e. consistency,
complexity, transition requirements, presentation)



Unnecessary complexity should be removed
Economic reality and long-term business model of insurance
contracts should be reflected
Metrics should reflect the need of general users
5
Market and operational Issues
Market issues




Underdeveloped long-term capital market
Few viable projects that can attract market financing
Lack of infrastructure financial instruments
Lack of market instruments (i.e. derivative, hedging
tools) to manage portfolio risk
 Constraints on long-term insurance business
(both demand side and supply side)
Operational issues
 Weakness in credit rating
 Lack of experience
 Uncertainty in legal framework
(i.e. creditors rights, resolution)
(Photo – Auckland, New Zealand)
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Collaboration with Capital market/FMI/PPP work is the key
APFF Insurance and Retirement Income Work Stream
 A holistic framework to support the long-term roles of
insurance and pension industry in the Asia Pacific region
Financial
Financial
stability
stability
Macro
Macro
economy
economy
Sustainable
Sustainable
development
development
Social
Social
security
security
Insurance
Insurance
coverage
protection
Insurance and
Insurance industry
pension industry
Regulation and
accounting
Capital market
and long-term
investment
Longevity
Solutions
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APFF Insurance and Retirement Income Workstream
Issues for the Asia Pacific Region
Makoto Okubo, Nippon Life Insurance Company
Any questions? email to [email protected]
or visit www.insurance-finance.com
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