Chr. Nounis (ELETEA): Necessary substantial targeted interventions for the further development of Occupational Insurance

IOBE study entitled “occupational insurance in Greece: Challenges and prospects” was presented at a relevant event organized by the Hellenic Association of Occupational Insurance Funds (ELETEA).

The President of EL.ETEA, Mr. Christos Nounis, underlined the role of the Union in the dissemination of the institution and the wide range of actions that are carried out. Particular emphasis was placed on the rapid development of the institution in the last 5 years and the need for substantial targeted interventions for the further development of the institution. He concluded by concluding that capitalization is now the new Necessity for our country, given the demographic pressures and the aging of the population but also the important national fiscal constraints. Therefore, the institutionalization of the possibility of setting up “multi-employer” TEAs and the provision of strong incentives for long-term savings proposed in the study, seem to be the safe empirical path to a better and sustainable insurance future.

Then, the representatives of IOBE Mr. Vettas and Gatopoulos presented the results of the study.

The institution, despite its systematic growth in recent years in Greece has great potential for expansion, as it remains much less widespread than in other European countries. In the period 2004-2021 the number of Occupational Insurance Funds (TEA) increased sixfold, but remains low penetration and their small size in Greece compared to other Eurozone countries. Thus, the total assets of the optional insurance TEAs correspond to only 0.1% of GDP, recording a lag compared to all other Eurozone countries (Chart 1).

Among the obstacles that, in the long run, limited the development of the institution in Greece, the study highlights the historically generous first public insurance pillar with high pre-crisis replacement rates, coverage of state budget deficits and low confidence in supplementary insurance institutions. . At the same time, it is stressed that the very structure of the Greek economy has been hampered, due, among other things, by the small size of businesses, high rates of self-employment, low savings rates, high tax burden at work and low household confidence in the financial sector.

In order to alleviate the above-mentioned entanglements and to take advantage of the prospects for the expansion of the institution of occupational insurance, policy measures are proposed in four areas: (a) interventions in the organization and operation of the funds towards a more flexible organizational structure, including the possibility of establishing multi-employer funds, (c) financial incentives for insured persons and employers to enable the healthy and sustainable development of occupational insurance in a stable and transparent tax framework – indicatively, in line with international practice, it is proposed to maintain significant tax incentives for one-off retirement benefits, but in conjunction with the application of universal limits, (d) broader interventions beyond occupational insurance, of this complementarity with the first and third pillar of insurance, as well as with the stimulation of the domestic capital market.

The effectiveness of the measures depends on the high degree of interdependence between them. For this reason, the proposed interventions should be implemented in a synchronized rather than piecemeal manner.

The main conclusion of the study is that occupational insurance can play a role of growth lever in the Greek economy, while at the same time strengthening the savings consciousness of households, improving work incentives and contributing to the better dispersion of wider insurance risk. According to the study, the strengthening of pension savings through occupational insurance will lead to an improvement of the productive infrastructure of the economy, to an increase in productivity and GDP. Indicatively, under certain conditions, a prospect is created for new capital reserves that can exceed € 20 billion in the long run, in real current terms. Respectively, it is estimated that GDP may be higher on average by approximately € 1.0 billion per year over a 40-year period, in real current terms (Chart 2). These direct effects are expected to be greater the wider the coverage of the workforce by occupational insurance and the longer this insurance lasts.

Interventions are also expected to have secondary macroeconomic benefits, through the strengthening of domestic savings and capital markets, as well as the wider financial services sector. In addition to the significant macroeconomic effects, the reform is expected to have a positive effect on household incentives to participate in the formal labor market. The tangible link of contributions with accumulated capital to a personal account can also strengthen employees ‘incentives to extend their formal working life, promote the level of household financial knowledge and boost employees’ confidence in the insurance system as a whole. .

In the discussion that followed, the Deputy Minister of Labor and Social Affairs, Professor OPA, Mr. Panos Tsakloglou, thanked EL.ET.E.A. for the invitation and IOBE for the high quality study for occupational insurance. He noted that the main problem of our country is the fact that savings are negative in our country until 2019 and was a key factor in changing the consumer model that led to the competitiveness crisis and the problems that plagued our country in the past 10 years. . Pillar 2, as an integrated effort to strengthen savings, can play an important role, as a complementary pillar, reaffirming its growth prospects and emphasizing its role in enhancing retirement income and living standards.

He noted that the end of illusions has occurred and the situation is positive, referring to the fiscal landing of the Greek economy and the reduction of past unsustainable pensions. The low penetration rates of the institution in Greece and the possibility of convergence with the European average and the reduction of insurance contributions up to 5% (they have already been reduced by 3.9%) which is the immediate target, offers the possibility for savings. The last factor that contributes to the development of the 2nd Pillar is the transformation of the auxiliary insurance into a capitalization, a fact that will contribute to the familiarization and information of the younger generations about the savings.

He even stressed that many of the proposals mentioned in the study are already the subject of discussion and preparation by the Ministry. Labor, such as the strengthening of supervisory bodies, the possibility of establishing multi-employer TEAs. the low level of confidence in the financial system and insurance, due to the financial literacy, but mainly the way the capitalization system works.

The government and the Ministry support the healthy and sustainable development of the industry, through the establishment of principles, rules, real needs, bonds of trust and high quality services to the insured. That is, the principles of good governance, adequate organization, sound systems and well-trained staff. Key elements are transparency, continuous and regular information of the insured. He also praised the role of strong funds for achieving economies of scale and reaffirmed the Pillar 2’s significant contribution to society and the economy, expressing the support of the Ministry of Labor and Social Affairs, as it is a critical factor in promoting .

The Chairman of the Hellenic Capital Market Commission, Mrs. Vasiliki Lazarakou, referred to three main issues, on the one hand, the supervision and the framework, the development of the Capital Market and the codification of the legislation. He noted accordingly that regardless of the choice of the way of exercising supervision, either in its current tripartite form, or with the establishment of a new supervisory authority, understaffing is a key problem in the proper fulfillment of the responsibilities of supervisory authorities. A key priority should be the state care for the adequate and appropriate staffing of highly qualified and experienced people, as well as the appropriate technical means of supervision. A key solution must be to improve the organizational structure between the three supervisory authorities and to be in line with European legislation.

The Managing Director of the Athens Stock Exchange Group, Mr. Socrates Lazaridis, congratulated the study of IOBE and the role of EL.ET.E.A. for the support of the institution of Occupational Insurance in Greece. From the experience of the TEA of the Athens Stock Exchange, he conveyed the need for interventions in the supervisory framework and in particular in the simplification of the procedures for the establishment of the TEA. He stressed the need to cultivate awareness for savings and especially the relationship between investment risk and return, proposing the use of digital capabilities and experience for the risk profile of employees. a) a ceiling on the size of the annual income contributions, b) the issue of taking care of the transfer of pension savings from other past programs and c) the possibility of early withdrawal of funds.

and the President of the Association of Institutional Investors (ETH), Mr. Chris Aesop stressed that the members of the ETH actively supported this study in the context of the broader belief that the institution of TEA is in the right direction to meet the needs for optional insurance for Greeks. In fact, ETHE proves its trust in the institution of TEA having established, the first multi-employer branch TEA for the staff of all its members. Finally, he noted that the Greek managers have accumulated experience and ability to understand the management requirements and needs of TEA, while in 2021 they have achieved significant very positive returns in all sub-categories of UCITS.