with large foreign financial institutions in particular large international

With large foreign financial institutions in

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with large foreign financial institutions, in particular large international banks and insurance companies. Second, in order to forestall a new situation where pension institutions are unable to meet the right of pensioners to realise a certain minimum return on their pension saving, life insurance companies and pension funds have actively pursued a strategy where they persuade customers to change to unit-linked schemes, thus changing the investment risk from the pension institution to the customer. Customers have been told that by abandoning the minimum return guarantee, it is possible to reach a higher average return on the pension saving because this makes it possible for the pension institution to place a larger share of funds in equities. This strategy has been supported by the authorities. Official reports have recommended a reduction in the coverage of minimum return guarantees in order to allow institutions more freedom to place in risky assets and thus to reach a higher return. 3 A large Danish academic literature has also supported the abandonment of minimum return guarantees in pension schemes. It follows from table 1 that unit linked schemes in Danish life insurance companies and pension funds have increased sharply especially after 2002. 3 This was, for example, the recommendation in the report from the ’Bremer Committee’, a committee which was established by the government to examine the possibilities of reaching more freedom of choice in pension schemes. See the Danish Ministry of Economics and Commerce (2003). 4
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Table 1 Assets in Danish life insurance companies and pension funds (billions of Danish Kroner) 1 Real estate Bonds Stocks Shares in mu- tual funds Loans Associa- ted com- panies Assets covering unit linked schemes 2 Other assets Total assets 1990 13.4 227.3 34.0 - 12.3 14.5 - 5.4 317.5 1991 14.2 235.8 42.3 - 11.5 24.1 - 23.4 351.2 1992 14.1 241.8 42.3 - 11.0 43.7 - 24.8 377.6 1993 13.1 272.2 60.9 - 10.4 52.0 - 25.3 433.8 1994 12.8 297.5 69.4 - 8.4 46.8 - 27.6 462.5 1995 14.3 321.7 92.6 5.6 5.0 53.8 - 7.2 500.2 1996 14.8 352.7 98.1 7.5 4.2 61.6 - 24.7 563.6 1997 15.4 378.7 139.8 10.1 3.5 71.4 - 25.4 644.2 1998 15.9 404.3 186.4 13.5 3.1 66.9 0.0 34.8 724.8 1999 19.8 420.8 266.4 30.2 3.1 89.1 0.2 34.7 864.3 2000 26.2 455.3 273.4 42.5 2.5 80.5 1.8 36.9 919.0 2001 30.4 514.4 194.2 57.9 2.5 65.5 3.4 53.4 921.8 2002 34.3 629.4 109.1 59.1 0.9 45.9 8.5 58.4 945.5 2003 27.6 658.2 129.1 83.4 0.5 61.0 17.6 56.1 1003.6 2004 28.5 663.7 148.6 141.2 0.4 62.8 32.9 71.2 1149.2 2005 31.6 701.5 187.4 110.2 1.0 146.3 47.6 108.7 1334.2 2006 37.1 694.2 232.4 129.6 0.9 167.4 66.1 85.0 1412.7 2007 34.3 686.4 229.3 146.6 1.0 197.8 82.4 88.6 1466.4 1. The table shows assets in Danish life insurance companies and industry-wide pension funds. Figures show billions of Danish Kroner (end-year). One Danish Krone is app. 0.13 euro. Source: The Danish Supervisory Authority (Finanstilsynet). 2. Shows assets which are invested under unit linked schemes, i.e. schemes where the investment risk falls on the customer. 5
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Table 2 Liabilities in Danish life insurance companies and pension funds (billions of Danish Kroner)1 Pension claims Debt Equity Other liabilities Total liabilities 1990 291.4 - 20.4 - 317.5 1991 321.4 5.7 23.2 6.6 351.2 1992 347.4 6.5 22.6 7.6 377.6 1993 385.4 6.0 37.5 10.9 433.8 1994 414.1 6.5 37.7 10.6 462.5 1995 447.9 7.4 42.1 10.2 500.2 1996 498.5 2.2 53.6 11.5 563.6 1997 566.7 10.3 64.9 12.7 644.2 1998 622.3 10.5 88.4 14.2 724.8 1999 721.2 18.6 120.3 22.8 864.3 2000 776.3 3.3 125.3 17.3 919.0 2001 801.8 15.8 96.4 23.6 921.8 2002 844.0 14.4 73.8 27.7 945.5 2003 897.9 19.2 90.7 45.0 1003.6 2004 986.7 17.3 103.5 58.9 1149.2 2005 1169.2 20.5 118.9 46.0 1334.2 2006 1245.9 25.4 130.1 36.7 1412.7 2007 1286.9 34.5 128.4 51.2 1466.4 1. The table shows liabilities in Danish life insurance companies and life insurance companies and industry-wide pension funds. Figures show billions of Danish Kroner (end-year). One Danish Krone is app. 0.13 euro. Source: The
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