Issues in the Regulation of Annuities Markets

Annuities are a vital aspect of a growing number of reformed pension systems around the world, and will be of increasing relevance in Europe as reform of generous social security schemes gathers pace. This paper addresses the regulation of annuities, essential to ensure integrity of the system, from three sides; prudential regulation of insurance companies, conduct of business regulation of insurance companies and the regulation of annuities within the overall pension system. We also consider some broader systemic issues that may arise. It is highlighted that the main risks in annuities are traditionally held to relate to errors in mortality and interest rate assumptions, but increasingly credit and broader systemic risks are also coming to the fore. Thematically, we suggest that research into the appropriate response of regulation to the dynamics of competition among annuity providers and the implications of ageing warrant particular study. Further issues bearing directly on regulatory regimes are raised by the Equitable Life debacle and the Japanese experience of life company failure.