Catalog

	Table of Contents
p. 41 of 58 BACK | NEXT Purpose and Structure of the Toolkit Part One: Introduction and Overview Part Two: Preconditions and Infrastructure for Financial Sector Development Part Three: Financial Regulation and Supervision I. Financial Stability, Development and Institutional Design II. Financial Regulation: General Principles III. Financial Regulatory Structure IV. Banking Regulation V. Bank Insolvency and Depositor Protection VI. Securities and Derivatives Regulation VII. Insurance and Pensions Regulation A. International Standards B. Guidance and Recommendations VIII. Regulation of Financial Conglomerates Part Four: Regional Financial Integration Part Five: ADB's Intervention in the Financial Sector Bibliography Glossary and List of Abbreviations Acknowledgements

Financial Sector Legal and Regulatory Toolkit : Part Three: Financial Regulation and Supervision

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VII. Insurance and Pensions Regulation

Insurance and pensions are important for financial development and economic growth. Research also suggests that the development of contractual savings institutions (e.g., pension funds and life insurance companies) might support securities market development, in addition to provide sufficient, sustainable, and affordable benefits for old age. To summarize conclusions:

• Institutionalization of savings leads to the deepening of stock and bond markets;
• The impact on stock market depth is stronger in countries where corporate information is more transparent;
• There are significant differences between countries and contractual savings have a stronger impact on securities markets in countries where: (i) the financial system is market-based, (ii) pension fund contributions are mandatory, and (iii) international transactions in securities are lower; and
• The impact of contractual savings on securities markets is not explained by other characteristics such as the overall level of development, openness to trade, the legal environment, and the demographic structure, therefore suggesting that policy decisions that shape the evolution of contractual savings institutions do matter and that the impact of contractual savings on securities markets is not due solely to slow moving factors. (Das, et al, 2003)

Preconditions for the development of pensions markets include the following: sound macroeconomic policies, the existence of a core of efficient and sound banking and insurance institutions, and a lasting commitment for the creation of an effective regulatory and supervisory agency and reform of the capital markets. (Impavido, et al, 2002)

Like securities regulation, insurance supervision has historically not received the attention given to that of banking. With the growth of financial conglomerates and the consequent spread of potential systemic risks throughout the financial system and with the development of significant insurance company assets available for investment, insurance regulation is an area of increased concern for regulators as well as a potential source of systemic risk in financial markets. (Das, et al, 2003). This has been brought dramatically to international attention by severe problems involving major global insurance conglomerates in the context of the current global financial crisis.

Back B. Guidance and Recommendations	Next A. International Standards