Retirement System Risk Management: Implications of the New Regulatory Order

In the wake of the worst financial crisis since the Great Depression, lawmakers and regulators around the world have changed the playbook for how banks and other financial institutions must manage their risks and report their activities. The US Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the European System of Financial Supervision (ESFS) is also crafting a framework to supervise regulated financial sector institutions including banks, insurers, pension funds, and asset managers. The implosion of the financial sector has also prompted calls for accounting changes from those seeking to better understand how assets and liabilities are reported. Initially banks were seen by many as the most important focus for regulatory reform, but other institutions are now attracting policymaker attention. There is logic to this in terms of managing systemic risk and ensuring a level playing field that avoids arbitrage between institutional structures. Yet the nature of pension and insurer liabilities is so different from that of bank liabilities that careful attention is needed in drafting appropriate rules. The new rules are having both direct and spill-over effects on retirement systems around the world. The first half of this volume undertakes an assessment of how global responses to the financial crisis are potentially altering how insurers, pension plan sponsors, and policymakers will manage risk in the decades to come. The second half evaluates developments in retirement saving and retirement products, to determine which and how these might help meet shortfalls in retirement provision. Contributors to this volume - Javier Alonso works for BBVA Research in Madrid Alfonso Arellano works for BBVA Research and Institute BBVA of Pensions in Madrid Andrew G. Biggs is a Resident Scholar at the American Enterprise Institute Joseph Busillo is a Senior Strategist for SEI's Institutional Group Asli Demirguc-Kunt is the Director of Research at the World Bank Catherine Donnelly is Associate Professor at the Department of Actuarial Mathematics and Statistics of the School of Mathematical and Computer Sciences of Heriot-Watt University Peter A. Fisher is a Partner with Tapestry Networks Montserrat Guillen is a Professor and Director of the Riskcenter at the Universitat de Barcelona Thomas Harvey serves as Director of the Advisory Team within SEI's Institutional Group Bryan Hoffman is a Senior Portfolio Strategist within the SEI Investment Management Unit Leora Klapper is Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank Raimond Maurer is the Chair of Investment, Portfolio Management, and Pension Finance at the Finance Department of the Goethe University Frankfurt Olivia S. Mitchell is the International Foundation of Employee Benefit Plans Professor, as well as Professor of Insurance/Risk Management and Business Economics/ Policy; Executive Director of the Pension Research Council; and Director of the Boettner Center for Pensions and Retirement Research, all at the Wharton School of the University of Pennsylvania Jens Perch Nielsen is Professor of Actuarial Science at the Cass Business School of the City University of London J. Michael Orszag is Global Head of Research at Towers Watson Georgios A. Panos is a Reader in Finance at Adam Smith Business School at the University of Glasgow Brian Reid is Chief Economist at the Investment Company Institute Ralph Rogalla is an Assistant Professor in the School of Risk Management, Insurance, and Actuarial Science at St. John's University Ivonne Siegelin is an actuary in product development for Generali Life Insurance in Frankfurt David Tuesta is a Chief Economist for BBVA Research in Madrid Karel Van Hulle is a Lecturer at the Business and Economics Facility of the Katholieke Universiteit Leuven Dan Waters is Managing Director of ICI Global