UNIT-LINKED LIFE INSURANCE CONTRACTS WITH INVESTMENT GUARANTEES - A PROPOSAL FOR ROMANIAN LIFE INSURANCE MARKET

The Global Financial and Economic Crisis has negatively influenced the international insurance markets, and implicitly the Romanian unit-linked life insurance market. As a consequence, unit-linked life insurance markets around the world are changing. Policyholders have become more aware of investment opportunities outside the insurance sector and they want to enjoy the benefits of investments in different financial instruments in conjunction with mortality protection, so insurers around the world have developed unit-linked products to meet this challenge. According to Romanian legislation which regulates the unit-linked life insurance market, unit-linked life insurance contracts pass most of the investment risk to the policyholder and involve no investment risk for the insurer. Due to the financial instability caused by the Global Crisis and the amplification of market competitiveness, insurers from international markets have started to incorporate guarantees in unit-linked products. Therefore the objective of this study is a proposal of a change in the design of these innovative products in order to respect the Solvency II regulation regarding the management of risk exposure and the policyholders' protection. The authors' purpose is to present a comparative analysis of the main financial instruments that may guarantee the unit-linked insurance contracts in order to create a balance between the insurers' interests and the policyholders' interests. This research proposes some legislative changes in the Romanian legislation regarding unit-linked life insurance market that may authorize the Romanian insurers to offer unit-linked contracts with and without investment guarantees.