US regulatory structure under review
US regulatory structure under review
The US Treasury Department has called for comment on what it termed
“a broad regulatory review” it is undertaking of the regulatory
structure associated with all financial institutions including
insurers, banks, insured depository institutions and securities
firms. The key issue driving the Treasury Department’s regulatory
review is to ensure that US capital markets remain competitive,
explained David Nason, the Treasury Department’s Assistant
Secretary for Financial Institutions.
For insurers, specifically, the Treasury Department outlined a
number of issues to be addressed. These include:
• what are the costs and benefits of the current system of
state-based regulation of the insurance industry?
• what are the key federal interests for establishing a presence or
greater involvement in insurance regulation, and what regulatory
structure would best achieve these interests?
• should the states continue to have a role, or the sole role, in
“Over the next several months, we will produce a regulatory reform
blueprint that will outline recommendations on how to modernise our
regulatory regime,” said Nason.
The Treasury Department called for comment by 21 November.
US retirement savings set new record
Assets held by Americans for retirement stood at a record $16.6
trillion on 30 March 2007, up more than $200 billion (1.22 percent)
from the end of 2006, according to a statistical series launched by
the Investment Company Institute, the national association of US
mutual funds and other investment companies. The new record
represents a 56.6 percent increase since the end of 2002 when
retirement assets – hard hit by falling global equity markets –
stood at $10.6 trillion, 10 percent lower than they had been at the
end of 1999.
At $4.4 trillion, the largest portion of retirement savings (26.5
percent) was in individual retirement accounts on 30 March. Of this
total, life insurers managed $322 billion (7.3 percent), banks $320
billion (7.3 percent), mutual funds $2.04 trillion (46.8 percent)
and brokers $1.67 trillion (38.4 percent).
Government pension plans and private defined contribution pension
schemes each accounted for 25.2 percent of total retirement assets,
private defined benefit pension schemes 13.7 percent and annuities
Long-term care insurance with flexibility
US insurer MetLife has taken a new approach to long-term care (LTC)
insurance with the launch of MetLife LTC LifeStage Advantage (MLA),
a product it said sets a precedent in the US by permitting
customers to purchase additional coverage (up to double) until age
65 without further proof of insurability.
The product offers a choice between two plans: Simple Advantage,
which targets what MetLife terms the “younger baby boomers” in the
40 to 50 age group; and Custom Advantage, targeting people getting
ready to retire or who are already retired. Additional features of
Custom Advantage include benefit increase options. Both plans
include a return of premium on death feature should the
policyholder die before age 70.
Insurance is a hard sell in the US
According to insurance and financial services association LIMRA
International, 68 million adult Americans – almost one-quarter of
the total population – have no life insurance. This high level is
hardly surprising, judging from a survey conducted by the Life and
Health Insurance Foundation for Education (LIFE) that reveals the
extreme reticence many people have towards dealing with insurance
issues. LIFE is a non-profit body dedicated to promoting public
awareness of life insurance.
Conducted in support of the insurance industry’s life insurance
awareness month, the LIFE survey found that 47 percent of adult
Americans prefer to go to the motor vehicle office to renew their
driver’s licence than to investigate their life insurance needs.
One in five said they would rather go to the dentist for a root
canal, 15 percent said they would rather babysit sextuplets and 11
percent preferred to get stuck on an underground railway train
without air conditioning.
F&C homes in on Dutch pension market
F&C Management (F&C), the 52 percent-owned asset management
subsidiary of UK insurer Friends Provident, is to offer a full
fiduciary management solution to the Netherlands’ pension fund
“Our aim as fiduciary manager is to establish an active partnership
between the pension fund board and F&C to ensure fund
liabilities and long-term objectives are met through tailored
strategies with access to an array of top investment managers,”
said Rob Kamphuis, director, fiduciary management at F&C
For selecting external managers, F&C has established a
partnership with Investment Manager Selection, one of the largest
institutional multi-managers in Europe, to provide research for
selection decisions and regularly review all candidate investment
“It is our belief that pension funds are looking for a fiduciary
manager who will work with them in providing a complete solution
for managing against their liabilities,” said Paul Niven, head of
asset allocation at F&C. “We aim to be a single contact for
pension funds who can package, manage and monitor their investment
strategies, and not just a multi-management provider.”
ING unveils new US headquarters
The US unit of Netherlands bancassurer ING Group, ING Insurance
Americas, has officially opened its new office building in Windsor,
Connecticut, built at a cost of $100 million. The new 475,000 sq ft
building will house more than 2,200 employees who currently work in
leased office space in Hartford.
A notable feature of the building is that key company executives
are located near the customer call centre, while the top floor,
traditionally reserved for executive offices, houses a cafeteria
and meeting spaces.
The environmentally friendly building has sensors that turn off
lights in unoccupied spaces, and dim lights on the building’s
perimeter to compensate for sunlight already flooding a particular
Advisers are a vital link in savings chain
Research undertaken by UK insurer Standard Life has highlighted
that less than one-quarter of people in the UK have regular access
to a financial adviser but those who do are considerably more
likely to be regular savers.
When conducting its research, Standard Life asked respondents if
they had an ongoing relationship with a financial adviser. Of those
who did, 77 percent said they were actively saving for the future,
while of those who did not have access to financial advice, only 46
percent were saving.
Overall, 76 percent of respondents said they do not have an ongoing
relationship with a financial adviser.
MERGERS AND ACQUISITIONS
Storebrand rights issue gets go-ahead
A rights issue by Norwegian life insurer Storebrand that is set to
raise as much as NOK10.7 billion ($2 billion) in new equity capital
has received approval from 82.4 percent of shareholders who
participated in an extraordinary general meeting held on 24
October. A two-thirds majority was required to proceed with the
The rights issue forms part of the arrangements being put in place
to finance Storebrand’s proposed acquisition of a number of Swedish
bank Svenska Handelsbanken’s (Handelsbanken) life insurance and
pensions units in a deal valued at a total of NOK15.3
The rights issue was opposed by Storebrand’s second-biggest
shareholder, Gjensidige, a Norwegian mutual insurer. Gjensidige,
which has a 10.04 percent interest in Storebrand, argued that the
price being paid for the Handelsbanken assets is too high.
Uncertain future for UK defined benefit
There is considerable uncertainty concerning the future of UK
private-sector defined benefit (DB) pension schemes, according to a
report published by independent research organisation the Pensions
Policy Institute (PPI). The PPI noted that about two-thirds of
private-sector DB schemes have been wound up, are closed or are in
the process of closing to new members. Where there are
replacements, they are predominantly defined contribution
Significantly, the PPI said it is not clear if private-sector DB
schemes that are still fully open to new members remain so because
their sponsors are committed to continuing DB provision or because
there are other barriers, such as poor funding positions, that are
preventing them from closing the schemes.
“On an optimistic view, not all schemes are closing, and the rate
of scheme closure has slowed in recent years,” said PPI research
director Chris Curry. However, he added that private-sector DB
pension provision will look very different to the provision of the
“There will be fewer schemes and risks will be shared differently
between employers and employees,” said Curry.
Axa finalises Italian partnership deal
A long-term partnership agreement in life and general insurance
between French insurer Axa and Italy’s Banca Monte dei Paschi di
Siena (BMPS), first announced in March this year, has been
finalised. As part of the agreement, Axa has acquired a 50 percent
share in MPS Vita (life insurance and savings), 50 percent in MPS
Danni (general insurance) and 50 percent in BMPS’s open pension
Axa will also take on the management of the two insurance
companies’ assets, which at the end of 2006 totalled €13 billion
($18.5 billion), and open pension funds’ assets of €300
According to Axa, BMPS has about 1,900 branches, about 4 million
customers and a “well-organised structure of channels of
distribution, including a sizable network of financial promoters”.
Founded in 1472, BMPS is considered the oldest bank in the
INITIAL PUBLIC OFFERS
Sony Financial debuts on Japanese exchange
Japanese financial services company Sony Financial Holdings (SFH)
listed on the Tokyo Sock Exchange on 11 October following the
largest initial public offer (IPO) in Japan this year. The IPO
raised ¥320 billion ($2.7 billion).
SFH’s units are Sony Life Insurance, which accounts for the major
portion of SFH in terms of history and scale of business, Sony
Assurance (general insurance) and internet bank Sony Bank. About 90
percent of SFH’s revenue is derived from Sony Life, which was
established in 1979 as a joint venture between Japanese electronic
product manufacturer Sony and US insurer Prudential Insurance of
As at 31 March 2007, Sony Life had policies in force totalling
¥30.24 trillion, up 4 percent compared with March 2006.
Swiss Life considers sale of units
As part of an overall strategic assessment of the group, Swiss Life
is reviewing its strategy for individual markets, a move the Swiss
insurer said could include the sale of businesses in the
Netherlands and Belgium.
The announcement came less than a month after Swiss Life confirmed
that as of 1 October it had closed the acquisition of
Liechtenstein-domiciled CapitalLeben, a supplier of structured life
insurance products for high net worth individuals. CapitalLeben was
merged with Swiss Life’s subsidiary, Swiss Life
According to Swiss Life, its units in the Netherlands and Belgium
contributed 9 percent and 3 percent, respectively, to its total
premium income of CHF22.1 billion ($18.7 billion) in 2006. Of a
total staff of about 9,000, 738 are in the Netherlands and 337 in
Prudential enters Vietnam’s consumer finance
Prudential has become the first foreign company to enter Vietnam’s
consumer finance market following its receipt of a licence from the
State Bank of Vietnam. The UK insurer has also become the first
foreign non-bank financial institution to enter Vietnam’s credit
Prudential Vietnam Finance Company (PVFC) will initially provide
personal loans, sales finance and home mortgages, and plans to
later introduce additional products including credit cards. PVFC is
the first consumer finance company within the Prudential
Prudential has been active in Vietnam since 1999, the year it
launched life insurer Prudential Vietnam. Based on total premium
income, Prudential Vietnam had a market share of 41.6 percent in
2006, making it the country’s leading life insurer. It is also the
biggest institutional fund manager in Vietnam and currently has
about $1.3 billion in funds under management.
Generali sets up for business in India
Future Generali, a joint venture (JV) between Italian insurer
Assicurazioni Generali and Indian consumer goods company Future
Group, has launched two businesses: its life insurance business is
known as Future Generali India Life Insurance, and the general
insurance arm is called Future Generali India Insurance.
The formal entry into India’s insurance market in late October
followed the decision by Generali and Future Group to form the JV
in May 2006 and the granting of licences by the Insurance
Regulatory Development Authority in September this year.
As part of its growth strategy, Future Generali will distribute
products via the stores and financial services outlets of Future
Group’s subsidiary, Pantaloon Retail.
India’s largest retailer, Pantaloon Retail operates more than 450
stores in 40 Indian cities, employs 18,000 people and serves about
140 million customers. Pantaloon Retail’s consumer finance unit,
Future Money, operates 74 outlets in 18 cities.
Generali owns 26 percent of Future Generali and Future Group the