Band 6, Heft 4

This article deals with three aspects of social security coverage. Firstly, we shall explore to what extent the state should cover private risks through its social security system. Secondly, we discuss the situation in Germany, with special regard to the question whether Germany’s current economic problems - stagnation and high unemployment - are caused by the growth of benefits provided by Social Security and the pay-as-you-go funding method. Thirdly, we look at risk coverage from the perspective of political economics. Polls show that the Germans increasingly mistrust the market mechanism. How, then, can the state reduce its coverage of individual risks and harness market forces instead of providing a minimum of social security?

Individuals are exposed over the life cycle to considerable biometric, economic, family and political risks. Do we have the right institutions to cover these risks efficiently? We use the term “institutions” in a broad sense comprising individual saving, family help, private insurance and finally the state with its social insurance systems. Where and when do these institutions work efficiently and effectively? Where and when do they fail? What needs to be done to improve them? What does modern „social risk management“ look like? The article sketches the theoretical underpinnings of saving behavior, portfolio choice and insurance demand and collects the empirical evidence in order to draw economic policy conclusions.

This article analyses the economic impact of terrorism on different countries and discusses the impact of terrorism on their property insurance markets. In the aftermath of September 11, 2001 co-operation between governments and the national insurance industries has often been necessary to ensure an adequate supply of insurance coverage. Therefore the article justifies this co-operation as an exception to general economic principles. Furthermore, the article presents an insight on the construction of the German terrorism insurer Extremus. It discusses the characteristic elements and distinguishes Extremus from solutions in other countries. Finally, the article argues that in the future alternative risk transfer will not be a real replacement for terrorism insurance and that international co-operation of governments to establish a world-wide terrorism cover will be extremely difficult.

This article makes an attempt to present the economics of credit securitisation in a non-technical way, starting from the description and the analysis of a typical securitisation transaction. The article sketches a theoretical explanation for why tranching, or non-proportional risk sharing, which is at the heart of securitisation transactions, may allow commercial banks to maximize their shareholder value. However, the analysis also makes clear that the conditions under which credit securitisation enhances welfare are fairly restrictive, and require not only an active role on the part of the banking supervisory authorities, but also a price tag on the implicit insurance currently provided by the lender of last resort.

Communication with different audiences is a special challenge for central banks. Communication has to be considered in the context of the principles of transparency and accountability. Their interdependence stems from the mandate of the central bank and its position in society. The communication policy of the European Central Bank reflects the particular challenges of a new institution in a complex monetary arrangement.