Life insurers and banks offering mutual funds stand to gain most from any expansion of Greece’s funded occupational pension plans.
The Greek life market is dominated by a handful of insurers. In 2001 the top four had 66% of the market, split between Interamerican (now part of the Netherlands-based consortium Eureko) with 22%, Ethniki with 16%, Nationale Nederlanden (now ING) with 14% and Aspis Pronia with 14%.
Group pensions, usually in the form of Deposit Administration Funds (DAFs), are a small but important part of their life business. Premiums for management of group pension funds totalled E139.1m in 2001, representing almost 11% of all life insurance premiums, according to the Association of Greek Insurance Companies,
A number of insurers also provide multinational pooling of employee benefits through their membership of pooling networks.
One relatively unexploited route into corporate pension business is via bancassurance. Last year ING Groep formed a strategic alliance with Piraeus Bank to create joint ventures in bancassurance, asset management and employee benefits. The joint ventures, which are owned 50.1% by ING and 49.9% by Piraeus Bank, have collectively14% of the life insurance market, 10% of the banking market and 8% of the asset management market.
Jan Nijssen, ING Groep’s global head of pensions, says that ING/ Piraeus will be targeting small and medium sized enterprises (SMEs) with up to 50 employees for its employee benefits business. It is distributing its employee benefits package to SMEs through the 2,500 agents of ING’s insurance subsidiary Nationale-Nederlanden Greece and through the branches of Piraeus. Marketing employee benefits to larger corporates is handled differently, with Piraeus providing leads to its corporate customers.
“It is encouraging to note that since we started marketing a group pension product to small to medium enterprises as well as to corporates, it has become a rapidly growing business from our point of view,” says Nijssen.
ING/Piraeus provides two types of group pension: a traditional life product and unit-linked product. “Both concepts are selling which is interesting because with the turmoil on the markets you would not expect much interest in the unit-linked product,” he says
Nijssen points out that Greece offers potential rather than present opportunities. “We perceive Greece as the cornerstone of ING’s strategy in south eastern Europe, because Greece is an EU member and also because, compared with other EU members like Spain and Portugal, Greece has not benefited so much as other countries from being a new member of the EU. We think they will catch up fast in the years to come.”
Part of this catching up will be reform of the pensions system. “It is very likely that pension reforms, in whatever form or shape, will be rolled out and executed in Greece.
It is hard to imagine that it will not happen.”
However, it is unlikely to happen until the second half of next year, he says. “Bearing in mind that the elections will be held in 2004, I would doubt it. But beyond the elections this topic will be at the top of the agenda of the administration.”
The prospects of a pre-funded second pillar also seem remote at the moment. “What shape the reform of the second pillar will take is not yet clear. Nothing has been cast in stone. And we do not know what the role of the private sector will be.”
He is more encouraged by prospects for the third pillar: “In the third pillar there was some measure of reform in the field of taxation, and in change from public to private sector, taxation is extremely important. Last year there was an increase in the tax-deductible amount from E400 to E1,000 per year.
“This is a good first step although it’s not difficult to imagine it could not be raised further. So from an ING/Piraeus perspective we perceive this to be a very important future development.”
Other insurers are certain that the reforms will benefit the insurance
sector in general and DC plans in particular.
Pavlos Psomiadis, president of the Aspis Group, says: “The private insurance principle is based upon the defined contribution concept and has a complementary role towards the social security system. The three pillar system is the one and only way out of the pensions problem in Greece.”