1 improving transparency in the insurance sector: progress made and outstanding challenges...

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Improving transparency in the insurance sector: progress made and outstanding challenges

OECD-ASSAL Regional Expert SeminarMontevideo, 26-27 September 2013

Timo BroszeitMonetary & Capital Markets Department

International Monetary Fund

This Presentation should not be reported as representing the views of the IMF.The views expressed in this presentation are those of the author and do not necessarily

represent those of the IMF, its Management, or its Executive Board.

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• Introduction

• G20 Data Gaps Initiative: Overview and Objectives

• G20 Data Gaps Initiative: Recent Progress

• Outstanding Challenges

Agenda

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Introduction

Financial crisis made data gaps more obvious than ever

Cross-border exposures

Interconnectedness

Risk concentrations

Tail risks

Derivatives

Credit default swaps

Leverage

Real estate prices

Public sector debt

Liquidity

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• Introduction

• G20 Data Gaps Initiative: Overview and Objectives

• G20 Data Gaps Initiative: Recent Progress

• Outstanding Challenges

Agenda

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G20 Data Gaps Initiative: Overview

• April 2009: G20 Finance Ministers and Central Bank Governors call FSB and IMF to explore gaps and provide proposals for strengthening data collection

• October 2009: FSB/IMF set up list of 20 recommendations, endorsed by G20 Finance Ministers and Central Bank Governors

• Annual progress reports by FSB and IMF (most recent: September 2013)

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G20 Data Gaps Initiative: Overview

Conceptual / statistical framework needs development

Conceptual / statistical framework exists and ongoing collection needs enhancement

Build-up of risk in the financial sector

#3 (Tail risk in the financial system and variations in distributions of, and concentrations in, activity)#4 (Aggregate leverage and maturity mismatches)#6 (Structured products)

#2 (Financial Soundness Indicators (FSIs))#5 (Credit default swaps)#7 (Securities data)

Cross-border financial linkages

#8 and #9 (Global network connections and systemically important global financial institutions)#13 and #14 (Financial and non-financial corporations cross-border exposures)

#10 and #11 (International Banking Statistics (IBS) and Coordinated Portfolio Investment Survey (CPIS))#12 (International Investment Position (IIP))

Vulnerability of domestic economies to shocks

#16 (Distributional information) #15 (Sectoral accounts)#17 (Government finance statistics)#18 (Public sector debt)#19 (Real estate prices)

Improving communication of statistics

#20 (Principal global indicators)

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G20 Data Gaps Initiative: Overview

A myriad of institutions working on these recommendations:

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G20 Data Gaps Initiative: Objectives

• Agenda with regard to insurance statistics:• Recommendation #2: Expand list of FSIs, incl. non-banks• Recommendation #3: FSIs - implementation of measures that cover tail

risks, concentrations, variations in distributions, volatility of indicators• Recommendation #4: FSIs - Develop measures of aggregate leverage and

maturity mismatches in the financial system• Recommendation #8: Interlinkages between SIFIs• Recommendations #10 and #11: Coordinated Portfolio Investment

Survey (CPIS)• Recommendation #13: Cross-border exposures• Recommendation #14: Standardized template covering international

exposures of large nonbank financial institutions• Recommendation #15: Sectoral accounts, in particular nonbank financial

institutions

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• Introduction

• G20 Data Gaps Initiative: Overview and Objectives

• G20 Data Gaps Initiative: Recent Progress

• Outstanding Challenges

Agenda

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G20 Data Gaps Initiative: Recent Progress

• G-SIFIs:• First template for G-SIBs finalized

• Phase 1 started in March 2013 (consolidated data on bilateral counterparty credit exposures and aggregated exposures)

• Phases 2 and 3 will progressively expand and enhance template• Data hub at the BIS

• Cross-border exposures:• Pilot exercise to set up an inventory of existing data on cross-border

positions

• CPIS:• Semi-annual (instead of annual) data collection since June 2013

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• Introduction

• G20 Data Gaps Initiative: Overview and Objectives

• G20 Data Gaps Initiative: Recent Progress

• Outstanding Challenges

Agenda

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Outstanding Challenges

• Expansion of FSIs which currently include: • 25 indicators for deposit takers• 2 indicators for other financial corporations

• assets to total financial system assets• assets to GDP

• 5 indicators for nonfinancial corporations• 2 indicators for households• 2 indicators for market liquidity• 4 indicators for real estate markets

• Quarterly reporting of FSIs

• Main challenge: which valuation framework?=> comparison across countries difficult!

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Outstanding Challenges

• G-SIFI data collection to include G-SIIs:• Main challenge (again…): which valuation framework?

=> comparison across companies difficult!

• Finally, some remarks on confidentiality:• Some reluctance with regard to sharing data with IMF, BIS and other

multilateral institutions• BIS data hub works under strict confidentiality safeguards• Even data sharing at bilateral or regional level can improve supervision!

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Outstanding Challenges (beyond G20 DGI)

• Consolidated data• Highest level of consolidation, incl. (non-financial) holding companies

• Data sharing between home and host authorities• Some more technical stuff:

• Interconnectedness with the banking sector• Direct exposures (bonds, equity, deposits, repos…)• Common exposures

• Asset-liability matching, interest rate sensitivities• Technical provisions

• Risk mitigation (reinsurance, hedging, securitization)• Modeling of catastrophe losses

• Pricing patterns and (re)insurance cycle

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Outstanding Challenges

Probably the biggest challenge…

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Questions?

TBroszeit@imf.org