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2.6.5. Insurers

Insurers may be split into two groups: short-term insurers, long-term insurers (also known as life companies or assurors). There are also re-insurers, but they fall into either of these two groups.

Short-term insurers intermediate between the corporate and household sectors on the liabilities side of their collective balance sheet (i.e. excluding the government and foreign sectors) (this is mainly in the form of insurance policies issued), and the corporate (share / equity and debt securities) and government (government securities) sectors on the asset side of their collective balance sheet. They also have financial intermediary securities (for example, deposits with banks and holdings of, say, SPV bonds) and other assets (such as bank notes and coins) on the asset side of their balance sheet.

Long-term insurers have a similar intermediation function as the short-term insurers. Their liabilities are comprised of various long-term polices, which are held mainly by the corporate and household sectors, while, on the asset side of their balance sheet, they hold the securities of all sectors with the exception of the household sector.

Re-insurers (like short-term insurers) are not regarded as financial intermediaries by purist economists, because their liabilities are not certain. We include them here for the sake of completeness. They intermediate between other insurance companies (because they re-insure a portion of their liabilities) and the corporate and government sectors (in the form of holdings of their securities).

2.6.6. Retirement funds

Retirement funds (also known as pension and provident funds) intermediate between the public (in the form of so-called contractual savings) on the one hand, and ultimate borrowers (mainly in the form of shares / equities and securities of the corporate and government and foreign sectors held) and financial intermediaries on the other. Last-mentioned would be represented by bank deposits and the securities of the banks and the other financial intermediaries.

2.6.7. Collective investment schemes

It will be recalled that in many countries there are three main types of CISs:

• Securities unit trusts (SUTs - also termed CISs in Securities).

• Property unit trusts (PUTs - also called CISs in Property).

• Exchange traded funds (ETFs).

Some other countries also have participation bond schemes (PBSs - also termed CISs in participation bonds).

Securities unit trusts (SUTs) intermediate almost solely between the household sector on the one hand and ultimate borrowers (the corporate and government sectors) and financial intermediaries (mainly banks) on the other. Their assets are made up of almost all the securities of the corporate and government sectors (such as shares, bonds, treasury bills) and bank liabilities such as NCDs and NNCDs.

Property unit trusts (PUTs) differ from the mainstream unit trusts in that they are closed funds (i.e. their investment portfolio is fixed). They intermediate mainly between the household sector and retirement funds, on the one hand, and the corporate sector on the other hand (i.e. the borrowers of funds for property developments).

Exchange traded funds (ETFs) are also appropriately called tracker funds. Their assets are comprised of the assets in the proportions that make up a particular index (e.g. the FTSE 100 Index) and their liabilities are the participation interests (PIs) of the investors.

Participation bond schemes (PBSs) have on the liability side of their balance sheets funds received from individuals (and minor amounts from other sources), while the asset side is comprised mainly of funds loaned to the corporate sector (in the form of mortgage bonds). They have limited activity with other financial intermediaries.

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