1. Unit Linked Products
Yannis Vasilatos
November 2013

2. The policyholder bears the investment risk.
Definition
UL PRODUCTS
Premiums are invested directly in a pool of assets. Returns to the policy-holder are dependent on the performance of the investment pool. An insurance element is always attached.
The policyholder bears the investment risk.

3. Types of U L products Pure UL without guarantees Hybrid products
CATEGORY
BRIEF DESCRIPTION
Pure UL without guarantees
A pure financial savings product, linked to the performance of a particular portfolio, with no financial guarantees attached, but which pays the market value of the units at the earlier of maturity, death or surrender.
Hybrid products
They combine merits of traditional participating life insurance and UL products by periodically shifting funds between the policy reserve stock of an insurer (with an interest rate guarantee), a guarantee fund and / or an equity fund.
Variable annuities
The funds are placed with an insurance company and the policyholder chooses how the money will be invested. The policyholder chooses from a pre-selected list of guarantees; each guarantee caries a certain cost.
Structured UL
UL guarantees are ensured by periodically allocating assets to risk-free and risky investments; such a mechanism invests funds in a pro-cyclical way and might lead to a cash-lock of the unit price during an observation period.
Capital guarantee products
The capital guarantee ensures that the investment is protected from market downturns.

4. Main qualities of U L products
Act as a vehicle of regular savings for the purpose of building a personal pension fund.
Flexible risk profile, tailored to the personal risk appetite of the policy owner.
Allow individuals with low available funds to invest in sophisticated investment/financial tools.
Regular premium UL products have an inherent mechanism to absorb the effect of market volatility.
Level of transparency on the performance of each policy is higher compared to traditional insurance products.

5. EUROPE Main trends and opportunities
UL products are leading products in life insurance.
UL individual pension markets are continuously growing in Europe.
After the 2008 financial turmoil, when UL policies‘ surrender phenomenon registered a historical peak, the investment linked insurance policies were the first to benefit from the financial markets recovery during 2010 and later.
In 2010, UL premiums covered over 62% of total life insurance premiums growing by 53% vs
In 2011, UL insurance GWP grew by about 18.5%, vs. 4.3% growth for the Life market overall.
UL life insurance line represents now a 40% share of the entire C.E.E. life market.
Strong customers’ demand for guarantees within UL products.
EUROPE

6. UL policies performed well by registering growth of 8.1% in 2012.
Country examples
EUROPE
UL is the main individual life business line. In 2011 UL business increased its share in the market portfolio by 5%.
It is the most developed UL market in Europe. Growth is mainly driven by individual pension market and offshore bonds.
UL policies performed well by registering growth of 8.1% in 2012.
The average share of UL products in total reserves is approximately 15% in 2012.
The only market where UL business experienced a slowdown versus Life market..
United Kingdom
Romania
Italy
Poland
France

7. The Greek market experience
U L products introduced in 1994.
Launching was strong to be followed by a long period of volatility before nearing maturity.
Proved resilient during current financial crisis.
Today UL products represent 21% of Life market GWP vs. 25% in 2008.
Drove growth of the institutional investors market, adding depth to asset portfolios with long term investment horizon.
Main challenges related to delays in properly training sales associates and building the right tools to educate customers.

8. Focus areas Action to further analyze and investigate the consumer
trends
on UL products
will be taken,
mainly by
cross-sectoral
analysis under
the auspices of
the Joint
Committee of
the European
Supervisory
Authorities
(ESAs)
CONSUMERS
Growing interest in UL products
►Complex products
►The associated risks and costs are not sufficiently transparent to policyholders
►Hybrid life insurance products which combine UL offerings with some with profit and/or guarantee element
REGULATORS
In response by Regulators:
►Increased cost transparency is required
►Guidance on the pre-contractual disclosure
►Structured licensing process for distribution channels

9. Managing challenges
Taxation for policyholders, company taxes, investment assets
Regulatory controls on capital, reserves, transparency
Financial reporting under IFRS, local GAAP
Leveraged components from US project to jump start the project and reduce overall expense
The same code base for the user interface
Started with the same JSON base, expanding as needed
The same data standardization toolkit and servers (with new library)
The same Web Service implementation for loading “Activity” data
The same MongoDB hardware for DEV, QA and PROD
Expanded the User Interface capabilities to address new requirements from Greece
Coded functionality to allow for UI localization (Greek UI)
Can now render Policy Riders
Implemented Active Directory authentication to support user authorization
Designed new data structure to support multiple roles for a person on a single contract (the same person as Owner and Insured)
Created all enhancements for ease of re-use by additional countries
Localization & Active Directory work will be leveraged by Japan in 2013
Payments type data (introduced by Greece) will soon be loaded into US Wall for certain Group Products
Policy Riders capability has high potential of future re-use
To continue the global nature of the application, Greece IT team will be key stakeholder in UI Version 2 Design over the next several months

10. Market evolution – new horizons
Low interest rates prevail globally affecting returns
Guaranteed returns become very expensive to offer
Consumers get more educated every day
Other industries are copying UL products
Managing risk is our business

11. Thank you