The governor of the Bank of Greece, the governor of the Bank of Greece, described as imperative the need for the participation of all three pillars of insurance in order to create a range of pension benefits. Giannis Stournaras speaking at the presentation of the book by Mr. Chr. Nouni with the title “The Professional Insurance Ecosystem in Greece”.

He pointed out that the country’s pension differs in terms of structure compared to these previous states of the western world as in Greece low insurance penetration is observed in Private Insurance and even lower in Professional Insurance Funds.

He estimated that this treaty can and should work as an advantage, as long as we take advantage of the international experience of the states that attempted similar reforms earlier.

The speech in detail

It is a great pleasure because I participate in the official presentation of this document as Supervisor of the Second and Third Pillar of Insurance, two of the three Pillars that can contribute to the formation of a modern and sustainable pension system.

The book we welcome today will provide a guidebook for all those involved in the effort to reform the country’s pension system.

It is a fact that the country’s pension system differs in structure compared to these earlier states of the Western world.

Within Europe we see, for example, states such as the Netherlands, the UK and Ireland, all three Pillars of Security and Protection will be developed, having balanced the burden that each of them can ideally take on.

In contrast, in Greece low insurance penetration is observed in Private Insurance and even lower in the Professional Insurance Fund. In fact, the insurance penetration in the latter is so small that I would dare to say that a large part of the insurance social insurances are not aware of the existence of this particular institution.

This disadvantage of low penetration can and should work as an advantage, taking advantage of the international experience of states that attempted similar reforms earlier.

Now, there is modern know-how available so that we do not walk in uncharted waters and using the experience with the characteristics of our own, we manage to build a pension system adapted to the new economic and social conditions, taking advantage of the elements that they can offer. each Pillar of Insurance.

The above finding, combined with the ever-lower replacement rates achieved through the First Pillar of compulsory insurance, makes it imperative that all three pillars of insurance be involved in creating a fan of pension benefits.

Balancing the redistributive First Pillar of Insurance with the capitalizing nature of the optional Second Pillar, representing the Occupational Insurance Fund, is vital for the sustainability of the country’s pension system.

Both the reduction of workers towards retirees and the increase in life expectancy make it necessary to use all available tools for the composition of post-retirement benefits.

The long-term success of a pension system is interwoven with it being as autonomous/self-financing as possible. It is now accepted that the retirement system of a Western society cannot have a purely redistributive character.

In addition to the demographic aging of the population, it is also the improvement of the standard of living of each succeeding generation, which increases the demands for ever higher post-processing benefits.

It is clear that the gradual reform of the pension system requires the strengthening of capitalization pillars, so that both employers and employees themselves can entrust part of their retirement income to them.

At this point I would like to point out the important reform that took place in the supplementary insurance of the first Pillar: The creation of TEKA! It concerns new entrants to the labor market from the beginning of 2022, contributing to the gradual conversion of the supplementary insurance of the redistributive system into a capitalized one. Additionally, it creates higher supplementary pensions, increases private savings and deepens the Capital Market.

With the figures so far, about 8% of the workforce has joined it with assets of less than 0.1% of GDP. The increase in private savings, in particular the savings of households, is necessary for the greater financing, with domestic savings resources, of investments, so that the current account balance is not overly burdened.

Additionally, I would like to highlight the catalytic role that the Supervisory Authority is called upon to play. Ensuring, that is, the orderly operation of the Private Insurance Market and the Professional Insurance Funds in an environment that should never operate competitively. On the contrary, the aim is for the three Pillars of Insurance to function in a complementary manner to maximize the benefit of the insured and by extension society as a whole.
The new law (n. 5078/2023) attempts to reform the institutional framework of occupational voluntary insurance, defining the conditions for the establishment, operation and supervision of Occupational Insurance Funds.

The Bank of Greece, using the tool of supervisory challenge, will exercise: financial supervision (adequacy of technical provisions, appropriateness of investments),
supervision of transparency requirements of the Professional Insurance Funds towards their members (collection and processing of appropriate information throughout the duration of participation of the insured in the Professional Insurance Funds).

In addition, without questioning the value of punitive measures in a possible violation of a supervised member, special weight will be given to the exercise of prudential supervision, so as to minimize the negative effects for the insured members.

A risk-based supervisory approach is adopted, focusing on the timely identification of immediate and future risks.

Also, the advisory role of the Bank of Greece is strengthened through communication with the supervised entities, since by better understanding their structure and operation, it can determine the application of the principle of proportionality.

In the context of the prudential supervision adopted by the Bank of Greece, the main emphasis of the Supervisory Authority is direct dialogue with the supervised, so that the latter understand that the supervisory applications are primarily useful tools for themselves and the Insurance Market.

Also, with the new law, the Supervisory Authority is given the possibility of timely and escalating intervention taking into account the protection of members.

Finally, there is a provision for the adoption of consolidation measures of an Occupational Insurance Fund.

The sustainability of the pension system is an intractable puzzle, with its success being confirmed over time.

Designing, therefore, a stable pension system that will ensure an adequate retirement income for its members and provide a reliable standard of living after their retirement, requires the attention and active participation of all stakeholders.

The Bank of Greece, as the most specialized organization in financial supervision with the orientation of the public interest, will take over from 01.01.2025 the supervision of the Occupational Insurance Funds with the aim of protecting their members and beneficiaries.

I thank Mr. Christos Nounis for the offer of this manual.

Efforts like this in all of us to be optimistic about the successful restructuring of the pension system, ensuring the right conditions for the well-being of society as a whole.