Banking leasing advice to real estate investment

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banking, leasing, advice to real estate investment trusts, writing and trading option, financial data, processing, and credit cards These build on services the company has already developed to meet its own needs
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o Insurance and banking- lie principally in marketing. Gramm-Leach –Bliley Act of 1999 removed barrier between banking and insurance The Structure of the Insurance Industry- The Pressure of Increasing Competition- o Driving force of consolidation is increase in competitive pressure The Liberalization of Insurance Markets- o Competitive pressure in a result of opening of insurance markets to foreign companies and domestic deregulations Demutualization- o Conversion of a mutual financial institution into a joint-stock corporation, a result of increasing competition and frenzy of mergers and acquisitions o As corporations, they can issue new shares to replenish equity capital, something that mutual cannot do. o Advantage of mutual organization- greater safety- less important because insurance co. are more stable today than they were in the past Pressure to Reduce Marketing costs- o Increasing competition in industry has called to cut cost of marketing, however it has also increased interest rates Public Policy and Regulation The Regulatory Framework- Insurance regulated at state level, government has no role. Must also comply with regulations of other states that they have business in Need state license Consumer Production- Insurance policy is a promise, promise keeping depends on strength of insurer (how they invest premiums, nature of insurance pool, and capital) o Consumer is at a disadvantage because they don’t know the strength of the insurer Rate Regulation and Availability- Unusual amount of gov. intervention in setting premiums Political Pressure to Lower Premiums- o Dissatisfaction with PL insurance The role of legal costs- o Legal cost increase has resulted in higher rates Availability- o Social obligation to make products available for those who need them o Argument that gov. should intervene to make sure that “safety net” (health insurance, etc.) available to all “Discrimination” in the Setting of Premiums o sometime obliged to refused insurance to certain customers to deal with issue of adverse selection and moral hazard Safety Regulation- Financial standards- o States set min. standards for granting and continuing insurance license. These restrictions include: Type of assets- for many yrs. Common stock was out of bound for life insurance
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Proportions of different types of asset in the portfolio- limits on stock, real-estate, and foreign bonds, and limit to amount of lending to any one borrower Quality of a given type of asset- prohibited investment in junk bonds.
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  • Fall '19
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