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ASIA-PACIFIC FINANCIAL FORUM
INSURANCE AND RETIREMENT INCOME WORKSTREAM
Policies and Regulations to Promote the Long-term 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
APFFASIA-PACIFIC FINANCIAL FORUM
• 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
2
APFF Insurance and Retirement Income WorkstreamAPFF Insurance and Retirement Income Workstream
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
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 Refrain from investing in non-fixed income assets
( Photo – Sydney, Australia)
( Source – APEC Seattle)
Regulatory issuesRegulatory issues
3
( Photo – Santiago, Chile)
Investment-type products Protection-type products
Lo
ng
evity risk
Mo
rtality risk
“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
4
Regulatory Issues (cont.)Regulatory Issues (cont.)
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
Accounting issuesAccounting issues
5
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
( Photo – Buenos Aires, Argentina)
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)
Collaboration with Capital market/FMI/PPP work is the key 6
Market and operational Issues Market and operational Issues
( Photo – Auckland, New Zealand)
A holistic framework to support the long-term roles of insurance and pension industry in the Asia Pacific region
APFF Insurance and Retirement Income Work StreamAPFF Insurance and Retirement Income Work Stream
7
Macro economy
Macro economy
Sustainabledevelopment
Sustainable development
Insurance coverage
Insurance protection
Insurance industryInsurance and pension industry
Financial stability
Financial stability
Social security
Social security
Regulation and accounting
Capital market and long-term
investment
Longevity Solutions
Makoto Okubo, Nippon Life Insurance Company
Any questions? email to [email protected]
or visit www.insurance-finance.com
APFF Insurance and Retirement Income WorkstreamIssues for the Asia Pacific RegionAPFF Insurance and Retirement Income WorkstreamIssues for the Asia Pacific Region
8