For the insurance market "a European regulatory scheme is being defined", but "the solution cannot be the one found for the banking world". This was stated by Salvatore Rossi, president of IVASS and managing director of the Bank of Italy, presenting in Rome the annual report of the Insurance Supervisory Authority.
“In the banks – Rossi explained – depositors can flee at any moment, in the grip of even an irrational panic, against which sometimes there is no financing of last resort that holds. In insurance, the holders of policies, especially life policies, take much longer to liquidate them. In banks, the only safeguard in the event of unforeseen losses is the capital, in insurance companies the first safeguard is the assets covering the technical reserves, then comes the capital”.
According to the number one of IVASS, "the principle that animates the new regulation of banking crises - if there is a crisis, the shareholders and creditors of the banks lose it, and immediately, not the taxpayers - can find justification in the large amount of money used in recent years to save banks in crisis (in countries other than Italy, we never stop remembering it). In the insurance sector this justification is much less important”.
CAR TPL: AVERAGE PRICE AT 420 EUROS WILL CONTINUE TO FALL
As regards the motor liability insurance sector, "five consecutive years of reduction in the average price brought the latter, in the fourth quarter of 2016, to 420 euros for a car for private use - underlined Rossi - In an international comparison the The average premium for compulsory insurance (net of taxes and contributions) in Italy was still higher in 2016 by 140 euros than in the three other large European countries (France, Germany and Spain). But the gap has narrowed compared to over 260 euros in 2011 and almost 190 last year”.
However, the scenario is by no means homogeneous: “There is still a lot of variability from area to area – specified the President of IVASS – in Naples the average price at the end of 2016 was around 630 euros, in Aosta it was 300. within the country, however, it too has decreased. Reduction of circulation due to the economic crisis and more effective fight against fraud, also thanks to technology, largely explain both results. Instead, we expect a further calming effect from the fight against fraud, thanks to the spread of black boxes (now installed on a fifth of vehicles on the road) and the entry into force in mid-2016 of the Integrated Anti-Fraud Archive".
INVESTMENTS: THE FOCUS ON GOVERNMENT BONDS WORRIES US
On the investment front, Rossi noted that those of Italian insurance companies are excessively concentrated on government bonds, which make up around 44% of the total portfolio, or 360 billion out of 810: "This strategy gives us some concern, because it exposes our companies, more than those of other European countries, at the risk of a sudden rise in interest rates on the securities held, with a consequent reduction in their market value”.
In international comparison, the president of the Authority noted that, "on the basis of OECD data fixed at 2015, Italian companies are more profitable than French and German ones", precisely thanks to the "concentration of their investments in Italian public securities , more profitable because they are judged more risky by the financial markets. This partly explains the request made by several parties in Europe to impose a capital requirement on public securities in the assets of companies, which takes into account this risk. We at IVASS have so far opposed this request with arguments of principle: a large part of the yield gaps that the markets demand derives from the perceived risk of the euro breaking up, a systemic risk that European rules cannot pass on to companies” .
DORMANT LIFE POLICIES FOR 4 BILLION: CHANGE THE LAW
Another phenomenon that arouses the attention of IVASS is that of dormant life policies, i.e. those expired in the last 5 years and never liquidated, because the companies do not know whether or not the policyholder died before the policy expired. “Very often the beneficiaries do not come forward because they don't know they are – explained Rossi – and in the policy they are indicated in a generic way (for example, “legitimate heirs”).
The phenomenon has reached "significant" dimensions, equal to at least 4 billion euros", therefore IVASS is asking the Government "to modify obviously imperfect legal provisions". In particular, the Authority suggests that the insurance companies can access the future national register of the resident population. The current rules, on the other hand, provide that unclaimed life policies after ten years are collected by the State through Consap.
CYBER RISK IS A PROBLEM TO BE ADDRESSED
On the IT side, Rossi pointed out that "cyber risk for the insurance world is a serious, new, pervasive risk. Rules, organizational measures, awareness will be necessary ". Companies are more exposed the more information systems integrate with the network, therefore IVASS is developing a new regulation on governance in which it will ask companies to implement cyber risk plans.
Attachments: Considerations Salvatore Rossi
