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10th NBS_OECD Workshop on National Accounts

Item 3.1

Recommendations for new SNA 1993 rev 1regarding the measure of output of financial services

François LequillerOECD

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1. Current price output of non life insurance

2. Own funds and output of banking

3. Clarifying the calculation of FISIM

4. Treatment of market makers

5. Price and volume issues for FISIM

6. Price and volume issues for insurance

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Current price output of non life insurance

Current SNA = Premiums + Premium supplements – Claims due

New SNA = Premiums + Premium supplements – Expected Claims

Smoother output of non life insurance The insurance service is the coverage of the risk, it is

not affected by the occurrence of the risk The difference between the occurrence of claims and

the expected claims = transfer to policy holders All reinsurance flows should be treated gross

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Own funds and output of banking

• SNA (6.134): lending of own funds “ (…) is not financial

intermediation as [units] do not channel funds from one

group of institutional units to another. Lending as such

is not a process of production and the interest received

from the lending of own funds cannot be identified with

the value of any services produced.”

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New SNA = broader definition of financial services => units lending own funds may provide a financial service.

Informal « money-lenders » will now be considered as productive even if they do not do financial intermediation

= > they will be classified as household or quasi corporation

In China: informal banking (hui) ?

Own funds: New SNA 1993 Rev 1

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• Deposits and loans attract implicit charges and these instruments are included in the calculations of FISIM.

• Other instruments may attract FISIM but will not be included unless a clear allocation to users is possible.

• Thus, in practice, FISIM will be limited by convention to loans and deposits and to financial corporations.

• FISIM should be calculated as (rL –rr)yL + (rr – rD)yD

• FISIM should be systematically allocated

Clarifying FISIM calculation

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• Margins on buying and selling of all securities by all financial corporations represent financial services.

• This includes « market makers ».

• The margin is calculated as the difference between mid-price (average of buy and sell price) and the buy and sell price, excluding any holding gain.

Market makers

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In the absence of direct deflators, one of the following

approaches is recommended: • The rate of change of the volume indicator can be derived

using the rate of change of stocks of loans and deposits

deflated by a general price index (e.g. the GDP deflator) on

which the base year margin can be applied. • Direct output indicator method. Break down the different

characteristics linked to financial services (e.g. numbers and

value of loans and deposits). For each of the characteristics

an appropriate volume indicator is to be derived. The volume

indicators are then weighted together.

Prices and volumes : SIFIM

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Statistical offices do calculate price indices for non-life

insurance services included as a PPI or as a CPI.

These price indices, called here “premium price

indices”, measure the change in the price of insurance

policies with fixed characteristics. They are different

from the ideal index, and should not be used to deflate

the current price output.

Prices and volumes : insurance services

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Recommended methods for non life insurance:

Method 1: obtain direct measure of the output by

extrapolating the current price measure of the

base year by the rate of change of a volume

index, itself obtained by deflation of gross

premiums earned by a premium price index.

Method 2: build a volume extrapolator calculated

as a premium (net or gross) weighted index of

number of policies, by line of product (house

owner insurance, car insurance, etc…)

Prices and volumes : insurance services