|
|
GFIA welcomes this report by the OECD, as it represents an in-depth, well-researched and much-needed analysis of insurers’ contribution to economic growth and financial stability. In particular, GFIA appreciates the extensive references made in the report to a number of key features of the insurance model which ensure that the industry plays a positive role in financial stability and contributes to long-term sustainable growth through investing long-term (e.g. liability driven investment approach with expected future claims matched with generally long term assets, low liquidity risk largely as a result of payments to policyholders being contingent on occurrence of an insured event and the availability of time in the event of a claim, high degree of substitutability and the ability of a failure within the sector to be resolved in an orderly manner should the need arise).
However, this could be further strengthened through a more direct link being made between insurers as long-term investors and real economic growth as well as financial stability. That is, the continual flow of premiums, even in periods of market downturn, enables insurers to be a source of liquidity and to buy assets when many other market players sell. This means that the industry has a counter-cyclical and stabilising effect on financial markets and the economy.
GFIA has some reservations with respect to the second part of the report in which the systemic relevance of insurers is being discussed. Consequently, it makes a few comments and observations on a number of relevant sections.
In addition, it is worth noting that the report’s conclusions are mainly based on existing studies and past experiences. However, given the current macro-economic environment (including bank deleveraging), the authors should also stress the need for policymakers working on debt crisis resolution proposals to bear in mind the ongoing positive growth contribution from the insurance industry.