Insurance and pension fund sector risks
94
Table 18: Overview of risks to financial stability related to insurance undertakings and pension
funds
U
nde
rly
ing
ca
us
es
Excessive risk-taking
by insurance undertakings and pension funds due to:
Pension fund sponsor faced with investment risk, e.g., in defined benefit schemes
Insurance undertakings faced with investment risk by carrying out non-traditional/non-
insurance activities
Liquidity risk
of insurance undertakings and pension funds financial derivatives activity.
Regulatory requirements
that may lead to correlated sales of assets as a result of asset downgrades.
Mul
tipl
ie
rs
Size
of insurance undertakings and pension funds
Inter-connectedness
of insurance undertakings and pension funds to banks and other NBFIs (due
partly to their size)
Pr
ox
im
at
e
ca
us
es
Events
around the financial crisis
bringing about
asset devaluations
either directly or through
heightened perceptions of counterparty risk.
Di
rec
t
im
pa
ct
s
Balance sheet impacts
on insurance undertakings and pension funds.
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