Insurance corporations
and pension funds in
OECD countries
Massimo COLETTA (Bank of Italy)
Belén ZINNI (OECD)
WPFS 2011, 24-27 October
Outline
Motivations
Insurance corporations in OECD countries
Pension funds in OECD countries
Conclusions
Motivations
 Insurance corporations and pension funds (ICPF) play
an increasing role in the financial systems of
industrialized countries
 ICPF are particularly important for households
 Analysis of the impact of the recent financial crisis
 Increased availability of cross-country comparable
statistics: OECD.Stat
Insurance corporations in OECD countries
 Market structure (number of insurers, number of
employees, market share)
 Sector evolution:
 Economic indicators:
• Penetration
• Density
 Financial indicators:
• Total financial assets of insurance corporations (IC) as a % of
total financial assets of financial corporations (S12)
• Asset composition
• The weight of insurance reserves in the households’ financial
assets
Insurance corporations in OECD countries
Market structure
Number of companies by insurance business (life, non-life,
composite and reinsurance)
 In all countries except Chile and Luxembourg, non-life IC more numerous than
life IC
Number of employees
 In 2009, 8,5 out of 11,5 millions (75 per cent) were non-staff
 In Japan 60 per cent of all employees
Country market share
 The US largest market with a share of 40 per cent in 2009
Insurance reserves composition by country
 Life reserves prevailing
Insurance corporations in OECD countries
Economic indicators
Gross premiums to GDP (penetration)
 France, Ireland, Korea, Luxembourg, Switzerland, the UK and
the US above 10 per cent of GDP in 2009
 Luxembourg is clearly an outlier
Gross premiums to population (density)
 Penetration dynamics confirmed even though exchange rates
impacted on data converted in US dollars
 Luxembourg still an outlier
Insurance corporations in OECD countries
Financial indicators
Total financial assets of IC as % of total financial assets of S12
 The intermediation role of IC has remained less important than that played by
banks and other intermediaries
 In 2009, Sweden and France had the highest ratios (less than 20%). In the
overall OECD area stable at around 9 per cent
Balance sheet composition
 Investment strategy fundamental to meet obligations with policy holders.
 Bonds are the dominant asset category
 Bonds and equities are channel for transmission of financial turmoil to IC
Weight of insurance reserves in households’ financial assets
 Ratios have generally remained at a low level
 Life insurance reserves 80% on average for the overall OECD area
Pension funds in OECD countries
 Contributions to private pensions
 Financing vehicles for the accumulation of pension
savings
 Autonomous pension funds (APF)
 APF total assets as a percentage of GDP
 APF total financial assets as a % of total financial
assets of S12
 APF asset allocation
 Pensions from a household perspective
Pension funds in OECD countries
Contributions
 The ratio of private pension contributions to household disposable
income has increased in most OECD countries over the last decade
 In 2009, private pension contributions represented a significant
proportion of household disposable income in many OECD
countries
Financing vehicles
 APF are the most common financing vehicle for the accumulation of
retirement savings in most OECD countries
 However, pension insurance contracts prevail in France, Sweden
and Denmark
 Non autonomous pension funds are rather uncommon in OECD
countries
Pension funds in OECD countries
APF assets as a percentage of GDP
 Huge disparities across countries and over time
 Relatively stable growth until 2007, a fall in 2008 and a recovery in 2009
APF financial assets as a % of financial assets of S12
 This ratio remains low in most OECD countries
 Downward trend over the last decade
APF asset allocation
 Significant increase of the proportion of shares and other equity in 19952006
 The financial crisis has prompted a reallocation in favour of less risky assets
such as currency and deposits and securities other than shares
 However, in the majority of countries, shares and other equity continue to
represent the highest share of pension funds investments
Pension funds in OECD countries
Household perspective
Net equity of households in pension funds reserves as a % of
households financial assets
 The weight of pension funds reserves in household financial assets has increased
over the last decade and proved to be resilient to the recent financial crisis
 In 2009, pension funds reserves represented more than 30 per cent of the
household financial assets in Australia (54%), Canada (35%), Netherlands (47%)
and Switzerland (34%)
Net equity of households in pension funds reserves as a % of
household disposable income
 The decline of this ratio in 2008 reveals that these reserves were actually
affected by the recent financial turmoil
 However, a partial recovery took place in 2009
Conclusions
Insurance corporations
 Since 1995, the weight of the IC in the total financial sector has
grown in many OECD countries. Nevertheless, for the OECD area as a
whole, the intermediation of IC is far less important than that played by
banks and other intermediaries
 As regards the asset allocation, on which the capacity of insurers to meet
their obligations crucially depends, bonds and equities are the primary asset
categories for insurance corporations in the OECD countries
 The financial crisis started in 2007 hit the balance sheet of insurers
especially through the equity component. Analysis of the change in total
financial assets for the period 2007-2009 shows a recovery towards the precrisis values
 Since 1995, the weight of life and non-life reserves in household
financial assets has increased in most OECD countries, even though
country ratios have generally stayed at a low level showing a limited role of
this asset category
Conclusions
Private pensions
 Contributions as a % of household disposable income have increased over
the last decade in most of OECD member countries
 APF are the most important financing vehicle
 Stable growth of APF. Impact of the crisis in 2007-2008 followed by
signs of recovery in 2009. APF’s weight in the whole financial sector is still
low in most OECD countries
 From a household perspective, the weight of pension fund reserves in
household financial portfolios has increased, although these reserves were
affected by the financial crisis and the values did not recover completely in
2009
 In some countries, household pension reserves have represented, for several
years, more than 100 per cent of their disposable income. The Netherlands
stand out with a household private pension wealth well above two times the
disposable income of the household sector
Conclusions
The role of statistics
 Increased availability
 Statistical gaps
 The role of institutional organizations (OECD, ECB, Eurostat)
 The need for cooperation
 Recent initiatives (G20 recommendations, ECB’s new ICPF
statistics)
ICPF in the OECD countries
Thank you for your attention.
Insurance corporations
Number of companies in the OECD area in 2009 (percentages)
8.1
3.4
21.7
Life
Non-life
Composite
Reinsurance
66.8
Source: Insurance statistics, DAF, OECD.Stat.
Insurance corporations
Gross premiums: country market share in the OECD area in 2009
Korea
Canada 3%
Others
14%
US
40%
3%
Italy
4%
Germany
6%
France
8%
UK
10%*
Japan
12%
Source: Insurance statistics, DAF, OECD.Stat. *Data for the United Kingdom refer to 2008.
Insurance corporations
Insurance sector penetration in 2009 (percentages)
50
45
40
35
30
25
20
15
10
5
0
Source: Insurance statistics, DAF, OECD.Stat.
Insurance corporations
Financial assets of insurance companies as % of S12 financial assets
20.0
18.0
16.0
14.0
12.0
10.0
1995
8.0
6.0
4.0
2.0
0.0
Source: Institutional Investors’s Statistics and Financial Balance Sheets non consolidated , STD, OECD.Stat
2009
al
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Insurance corporations
Insurance companies: balance sheet composition in 2009
100%
80%
60%
40%
20%
0%
Source: Institutional Investors’ Statistics, STD, OECD.Stat.
Non-financial
assets
Other assets
Shares
Securities
Insurance corporations
Households: life and non-life insurance reserves as a % of their
total financial assets
60.0
50.0
40.0
30.0
1995
20.0
10.0
0.0
Source: Financial Balance Sheets, non consolidated, STD, OECD.Stat.
2009
Private pension schemes
Private pension contributions as % of household disposable income
20.00
18.00
16.69
16.00
14.85
13.78
14.04
14.00
11.56
12.00
10.64
9.66
10.00
2002
8.00
2009
5.47
6.00
4.01
4.00
2.90
2.85
1.55
2.00
0.58
1.06
1.05
0.64
2.51
2.96
2.56
1.40
1.18
1.10
1.03
0.98
0.01
0.00
Source: Contributions from Pension Statistics, DAF, and Household disposable income from National Accounts, STD, OECD.Stat.
Private pensions’ financing vehicles
Pension assets by financing vehicle as a % of total pension assets in 2009
United States
United Kingdom
Turkey
Switzerland
Sweden
Spain
Slovenia
Slovak Republic
Portugal
Norway
New Zealand
Netherlands
Mexico
Luxembourg
Korea
Israel
Ireland
Iceland
Hungary
Greece
Germany
France
Finland
Estonia
Denmark
Czech Republic
Chile
Canada
Belgium
Austria
Australia
0.00
10.00
20.00
30.00
40.00
Autonomous pension funds
Pension insurance contracts
Source: Pension Indicators, DAF, OECD.Stat.
50.00
60.00
70.00
80.00
90.00
Non-autonomous pension funds (book reserve)
Other
100.00
Pension funds
Autonomous pension funds assets as a % of GDP in 2002 and in 2009
140.0
120.0
100.0
80.0
60.0
2002
2009
40.0
20.0
0.0
Source: Institutional Investors’ Assets , STD, OECD.Stat.
Pension funds
Autonomous pension funds financial assets as a %
of total financial assets of S12
18.00
16.00
14.9
13.8
14.00
11.2
12.00
10.8
10.00
10.7
9.3
8.2
8.00
6.1
6.0
6.00
2009
4.00
2.00
2002
3.0
1.0
0.6
3.2
2.8
0.9
3.3
0.8
1.0
2.8
2.3
2.2
1.7
0.5
0.00
Source: Institutional Investors’ Assets and Financial Balance Sheets, non consolidated. STD, OECD.Stat.
Pension funds
Autonomous pension funds: asset allocation in 2009 (percentages)
United Sta tes
United Kingdom
Switzerla nd
Spa in
Portuga l
Pola nd
Netherla nds
Luxembourg
Ita ly
Isra el
Icela nd
Hunga ry
Estonia
Czech Republic
Ca na da
Belgium
Austria
Austra lia
0.00
10.00
20.00
Currency a nd deposits
Sha res a nd other equity
30.00
40.00
50.00
60.00
Securities other tha n sha res
Other
Source: Institutional Investors’ Assets, STD, OECD.Stat.
70.00
80.00
90.00
Loa ns
Non-fina ncia l a ssets
100.00
Pension funds
Net equity of households in pension funds reserves as a % of
total financial assets of the household sector
60.00
54.4
50.00
47.2
40.00
35.4
33.9
28.4
30.00
26.9
24.4
22.9
20.7
20.00
15.3
15.3
13.1
10.00
6.7
3.3
12.7
13.1
11.8
8.3
6.1
5.2
5.9
4.4
1.9
0.7
6.4
5.9
2.0
2.7
0.00
1995
2005
2009
Source: Financial Balance Sheets, non consolidated (except for Australia and Israel for which only consolidated data are
available), STD, OECD.Stat.