INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENT
Abstract. Life insurance, as well as bank deposits, is a form of household savings, so contributions under life insurance contracts must be properly guaranteed by creating compensation mechanism. The paper deals with a number of issues in relation to the solutions for Ukrainian life insurance guara...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
FINTECH Alliance LLC
2021-04-01
|
| Series: | Фінансово-кредитна діяльність: проблеми теорії та практики |
| Subjects: | |
| Online Access: | https://fkd.net.ua/index.php/fkd/article/view/3153 |
| _version_ | 1827091760408428544 |
|---|---|
| author | O. Shevchuk N. Yaroshevych L. Yevtukh |
| author_facet | O. Shevchuk N. Yaroshevych L. Yevtukh |
| author_sort | O. Shevchuk |
| collection | DOAJ |
| description |
Abstract. Life insurance, as well as bank deposits, is a form of household savings, so contributions under life insurance contracts must be properly guaranteed by creating compensation mechanism. The paper deals with a number of issues in relation to the solutions for Ukrainian life insurance guarantee scheme (IGS). The main purpose of this study is to introduce decision on scheme design and appropriate fund-raising mechanism for Ukrainian IGS providing the last resort protection to customers who make their savings via life assurance contracts. Highlighting positive and negative effects of IGS implementation, analysing sources of funding for guarantee schemes, the research substantiates economic effects of risk-based approach to assessing contribution and proposes general scheme of estimating the insurer’s contribution to the IGS fund, in particular indicators for risk-based adjustment of IGS levies and adjustment procedures.
Based on methods for calculating contributions to European deposit guarantee schemes, the article specifies technically sound methods for calculating contributions to IGS fund which capture various aspects of the insurers’ risk profile including capital adequacy, asset quality, liquidity and funding, profitability profile, business management, as well as the potential loss for the IGS and market circumstances.
The methodology, proposed in the paper, is relevant not only for Ukraine, where the introduction of the IGS scheme for life assurance is only in perspective, but also for all other countries with existing IGS to implement risk-weighted approach to scheme setting that prompts insurers to control their risks, provides more effective and healthy competition.
Keywords: life assurance, insurance guarantee scheme, policyholder protection, funding mechanism, risk-weighted contribution.
JEL Classification G22, G33
Formulas: 5; fig.: 4; tabl.: 1; bibl.: 13.
|
| first_indexed | 2024-03-12T05:12:27Z |
| format | Article |
| id | doaj.art-19dd4b11f6e34aac9d5cbb30b3f9cf9c |
| institution | Directory Open Access Journal |
| issn | 2306-4994 2310-8770 |
| language | English |
| last_indexed | 2025-03-20T06:01:25Z |
| publishDate | 2021-04-01 |
| publisher | FINTECH Alliance LLC |
| record_format | Article |
| series | Фінансово-кредитна діяльність: проблеми теорії та практики |
| spelling | doaj.art-19dd4b11f6e34aac9d5cbb30b3f9cf9c2024-10-02T21:17:52ZengFINTECH Alliance LLCФінансово-кредитна діяльність: проблеми теорії та практики2306-49942310-87702021-04-0123710.18371/fcaptp.v2i37.230265INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENTO. Shevchuk0N. Yaroshevych1L. Yevtukh2Lviv Polytechnic National UniversityLviv Polytechnic National UniversityBanking University Abstract. Life insurance, as well as bank deposits, is a form of household savings, so contributions under life insurance contracts must be properly guaranteed by creating compensation mechanism. The paper deals with a number of issues in relation to the solutions for Ukrainian life insurance guarantee scheme (IGS). The main purpose of this study is to introduce decision on scheme design and appropriate fund-raising mechanism for Ukrainian IGS providing the last resort protection to customers who make their savings via life assurance contracts. Highlighting positive and negative effects of IGS implementation, analysing sources of funding for guarantee schemes, the research substantiates economic effects of risk-based approach to assessing contribution and proposes general scheme of estimating the insurer’s contribution to the IGS fund, in particular indicators for risk-based adjustment of IGS levies and adjustment procedures. Based on methods for calculating contributions to European deposit guarantee schemes, the article specifies technically sound methods for calculating contributions to IGS fund which capture various aspects of the insurers’ risk profile including capital adequacy, asset quality, liquidity and funding, profitability profile, business management, as well as the potential loss for the IGS and market circumstances. The methodology, proposed in the paper, is relevant not only for Ukraine, where the introduction of the IGS scheme for life assurance is only in perspective, but also for all other countries with existing IGS to implement risk-weighted approach to scheme setting that prompts insurers to control their risks, provides more effective and healthy competition. Keywords: life assurance, insurance guarantee scheme, policyholder protection, funding mechanism, risk-weighted contribution. JEL Classification G22, G33 Formulas: 5; fig.: 4; tabl.: 1; bibl.: 13. https://fkd.net.ua/index.php/fkd/article/view/3153life assuranceinsurance guarantee schemepolicyholder protectionfunding mechanismrisk-weighted contribution |
| spellingShingle | O. Shevchuk N. Yaroshevych L. Yevtukh INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENT Фінансово-кредитна діяльність: проблеми теорії та практики life assurance insurance guarantee scheme policyholder protection funding mechanism risk-weighted contribution |
| title | INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENT |
| title_full | INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENT |
| title_fullStr | INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENT |
| title_full_unstemmed | INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENT |
| title_short | INTRODUCING A LIFE ASSURANCE GUARANTEE SCHEME IN UKRAINE: FUNDING MECHANISM AND RISK-BASED ADJUSTMENT |
| title_sort | introducing a life assurance guarantee scheme in ukraine funding mechanism and risk based adjustment |
| topic | life assurance insurance guarantee scheme policyholder protection funding mechanism risk-weighted contribution |
| url | https://fkd.net.ua/index.php/fkd/article/view/3153 |
| work_keys_str_mv | AT oshevchuk introducingalifeassuranceguaranteeschemeinukrainefundingmechanismandriskbasedadjustment AT nyaroshevych introducingalifeassuranceguaranteeschemeinukrainefundingmechanismandriskbasedadjustment AT lyevtukh introducingalifeassuranceguaranteeschemeinukrainefundingmechanismandriskbasedadjustment |