ASIA PACIFIC FINANCIAL FORUM An Overview of APFF Work Related to Retirement, Health and Long-term investments Makoto Okubo, Nippon Life Insurance Company Sherpa, APFF Insurance and Retirement Income Work Stream Auckland, 2 February 2018

2017 APEC Joint Finance Ministerial Statement 2017 APEC JOINT FINANCE MINISTERIAL STATEMENT was issued on 15 October 2016 in Hoi An. It assesses the global and regional economy and describes joint actions to be implemented by APEC economies over the next year to achieve strong, sustainable, balanced and inclusive growth. Among them include measures to address long-term infrastructure investment, financial inclusion, base erosion and profit shifting, and disaster risk financing and insurance. It includes the following paragraph: We welcome ABAC and the APFF’s contribution to the implementation of the CAP, including the recommendations on financial market infrastructure and micro insurance. We encourage continued collaboration among interested relevant stakeholders in advancing these initiatives of the CAP. We welcome the exploratory dialogues between senior finance officials, Life Science and Innovative Forum (LSIF) and Health Working Group (HWG) to address the fiscal and economic impacts of the steep rise in chronic disease and of ageing societies in APEC economies. We encourage further dialogue with interested economies to share best practices and explore innovative, sustainable health financing solutions

2017 APEC Joint Finance Ministerial Statement (cont.) 3 The joint statement also contains an annex on diversifying financing sources and fostering private sector involvement in infrastructure investment in APEC economies. As for institutional investors and promoting infrastructure as an asset class, the annex includes the following: There is a large potential to expand investment by public and private institutional investors – particularly multilateral and national development banks, pension funds, insurance companies, Sovereign Wealth Funds (SWFs) and mutual funds. Governments may review financial regulations that may potentially pose unintentional barriers to infrastructure investment by institutional investors, taking into account prudential, investor protection, and overarching financial stability objectives. In order to attract institutional investors to the full spectrum of infrastructure assets, such assets need to be structured as attractive investment opportunities, providing revenue streams and risk-return profiles that match investors’ return expectations and liability structures.

The APFF Structure Asia-Pacific Financial Forum (APFF) APEC Finance Ministers Process (FMP) APEC Business Advisory Council (ABAC) Asia-Pacific Financial Forum (APFF) APFF Work Streams Financial Infrastructure Development Network Trade / Supply Chain Finance Capital Markets Financial Market Infrastructure / Cross-Border Practices Insurance / Retirement Income Linkages / Structural Issues Credit Information Classic repo markets Retirement /Health/ Long-Term Investment Secured Transactions Derivatives Disaster Risk Financing /Insurance Accounts Receivables Finance Asia Region Funds Passport Microinsurance Disaster Risk Financing

APFF Insurance and Retirement Income WS [Sherpa Makoto Okubo] CAP 4E Long - Term Investment in Infrastructure 3B Disaster Risk Financing and Insurance WG Retirement, Health and Long-Term Investment Working Group [Sherpa Makoto Okubo / Vice Sherpa Paul F. Lynch] Disaster risk financing and Insurance Working Group [Sherpa Masaaki Nagamura] Retirement and protection [led by Vanessa Wang] Disaster Risk Financing [led by Masaaki Nagamura] SG Infrastructure and Investment [led by Brian Murray] in collaboration with APFF CMWS and APIP Regulation and Accounting [led by Makoto Okubo] Micro-Insurance [led by Antonis Malagardis] in collaboration with Financial Inclusion Group Innovative Health Financing Mechanism [led by Ryan MacFarlane] in collaboration with LSIF Islamic Infrastructure Investment Platform (I3P)

2017 APFF Progress Report to APEC Finance Ministers APFF work on retirement and long-term investment 2017 APFF Progress Report to APEC Finance Ministers Expanding the Region’s Long-Term Investor Base Triple wins thru Retirement income and long-term investment Consumers receive high and stable returns for long-term savings The financial sector is able to access deeper capital markets for infrastructure investment. Governments obtain relief from large contingent fiscal liabilities Triple gaps to address to achieve the above objective Pension/Protection Gap Infrastructure/Investment Gap Regulatory/Accounting Gap

Mandatory provisions and scalable retirements systems Pension/Protection Gap Mandatory provisions and scalable retirements systems Tax incentives to promote long-term saving products Product/distribution innovation and financial awareness

Pension/Protection - Progress The APFF intends to coordinate with global initiatives (i.e. OECD, World Economic Forum) and the pension industry (i.e., Asia Pacific Investors Cooperation) and to hold dialogues with both pension and insurance regulators APFF/APIC Regional Pension Funds and Social Security Systems Summit, 5-6 December 2017, Hong Kong The APFF continues to study selected APEC economies and examine gaps and potential solutions on retirement income and longevity solutions. The following are some examples of the recent developments in the region Thai Government introducing a new mandatory provident fund scheme Malaysia’s Employees Provident Fund (EPF) receives innovation award for its retirement advisory service Australian government’s consultation on the Discussion Paper Life Annuity Scheme in Hong Kong

Pension/Protection - Work plan End goals (draft as of 26 January 2018) By 2022: Expand the pension fund investor base by promoting adoption by relevant policy makers of best practices in: (a) designing mandatory provisions for retirement savings, (b) design and implementation of tax incentives for long-term savings products; and (c) product and distribution innovation and financial awareness. 2018 deliverables (draft as of 26 January 2018) Work with selected APEC economies’ Regulators on filling pension gap 　(both in accumulation and decumulation) Case studies/follow-ups on Chile, Hong Kong, Thailand, Korea (TBC) Toolbox to expand retirement savings and longevity solutions (i.e. mandatory provisions, tax incentives, government subsidies, longevity transfers, digital economy and 4th pillar) Major 2018 actions (draft as of 26 January 2018) 3Q or 4Q 2018, Hong Kong (TBC): APFF Dialogue/roundtable on retirement income and protection [Host: TBD] Other roundtables/workshop meetings throughout the year in collaboration with OECD, APIC, etc.

Promotion of infrastructure as a defined asset class Infrastructure/investment Gap Promotion of infrastructure as a defined asset class increased fiscal spending by Asian sovereigns within macroeconomic parameters suitable for developing economies adoption of various financing vehicles, with a broader public-private partnership framework to promote long-term infrastructure investment

Infrastructure/Investment - Progress The APFF is coordinating with global (i.e. Global Infrastructure Hub, OECD, WEF) and ASEAN initiatives (i.e. AIC) and the securities industry (i.e. ASIFMA), and undertakes dialogues with selected APEC economies (i.e. Indonesia, Vietnam, Philippines, Thailand) APFF/APIP Dialogue with Indonesian Government on PPPs in Waste Management on 14 March in Jakarta APEC Finance Ministers Process Seminar on Long-Term Investment in PPP on 17 May in Ninh Binh APFF Roundtable on Long-Term Investment on 25 July in Toronto The APFF continues to study selected APEC economies and examine possible improvements to attract long-term investors, including financing vehicles, green finance, and survey on infrastructure investments: Rethinking risk allocation in PPPs The IFC/WBG’s PPPs in infrastructure

Infrastructure/Investment - Work plan End goals (draft as of 26 January 2018) By 2022: Promote expanded investment by insurance firms and pension funds in infrastructure through the development o innovative financing vehicles and regulatory changes to treat infrastructure as an asset class. 2018 deliverables (draft as of 26 January 2018) Work with Singapore and Hong Kong Regulators on reform of solvency regulations. New regulations to include special treatment of debt and equity investment related to infrastructure Toolbox to facilitate infrastructure investment (i.e. financial vehicles, government incentives, PPP initiatives) Major 2018 actions (draft as of 26 January 2018) 3Q or 4Q 2018, Singapore and/or Hong Kong (TBC): APFF Dialogue/roundtable on infrastructure and investment to achieve agreement on definition of infrastructure drawing on existing EU, NAIC and World Bank definitions, and to identify specific areas where regulations can be amended to remove unnecessary barriers to investment (drawing on work of APIP). [Host: TBD] Other roundtables/workshop meetings throughout the year in collaboration with APIP, SDIP, ASEAN, etc.

Bank-centric regulations Short-term oriented economic regime Regulation/Accounting Gap Bank-centric regulations Short-term oriented economic regime “One-size-fits-all” model Remaining key accounting issues Unit of account Scope for “variable fee approach” Transition

Regulation/Accounting - Progress The APFF participates in global and regional conferences and meetings to discuss relevant regulatory and accounting issues. The APFF has engaged in continuous outreach and dialogue with policymakers, regulatory authorities and accounting standard setters, international (i.e. IAIS, IASB, OECD, World Bank) and regional institutions (i.e. ADB, ASEAN, NAIC, ASSAL) IAIS Work on risk-based global ICS and Dialogue with IAIS IFRS17 and Dialogue with IASB Dialogue with regulatory authorities in the region Coordination with AIC, Geneva Association and IIF The APFF continues to study selected APEC economies and examine regulatory and accounting issues and consider possible implementation support: APFF Roundtable on Insurance Regulations and Accounting on 31 October in Hong Kong

Regulation/Accounting - Work plan End goals (draft as of 26 January 2018) By 2025: Adoption of solvency and accounting regimes that do not discourage insurers from making long-term investment in infrastructure and capital markets 2018 deliverables (draft as of 26 January 2018) Work with Indonesia, Thai and Hong Kong Regulators (TBC) on IFRS17 (and IFRS9) to mitigate unintended consequences on long-term business Achieve stakeholder consensus on incorporating growth in global regulatory discussions (i.e. discount rate) Checklist on implementation of IFRS17 including potential impact on financial reporting and solvency assessment and recommended adjustments (if any) Major 2018 actions (draft as of 26 January 2018) 3Q or 4Q 2018, Jakarta, Bangkok, and/or Hong Kong (TBC): APFF Dialogue/roundtable on insurance regulations and accounting to continue outreach and dialogue with policymakers, regulators, standard setters and international institutions [Host: TBD] Other roundtables/workshop meetings throughout the year in collaboration with OECD, ADB, ASEAN, etc.

Innovative Health Financing Mechanism - Work plan End goals (draft as of 26 January 2018) By 2022: Establishment of structures and adoption of best practices in APEC members to harness the private sector in creating innovative and sustainable health financing mechanisms 2018 deliverables (draft as of 26 January 2018) Initiate a pilot project in Thailand to establish and support a structure within the Thai Government that can lead efforts to develop innovative and sustainable health financing mechanisms. Major 2018 actions (draft as of 26 January 2018) 2Q 2018, Bangkok: APFF Workshop on Innovative and Sustainable Health Financing Mechanisms [Host: Thai Ministry of Finance, ABAC Thailand]

2017 seminars contributed by the APFF RLTIWG 17th OECD/ADBI Roundtable on Capital Market and Financial Reform, Tokyo, 2-3 March 3rd Indonesia Infrastructure Finance Conference, Jakarta, 17-18 May 5th EIOPA/ICIR Conference on Global Insurance Supervision, Frankfurt, 6-7 September OECD/NAIC/OIC Roundtable on Insurance and Retirement Savings in Asia, Bangkok, 20-21 September 5th Insurance China International Summit, Shanghai, 21-22 September 2017 International Longevity Risk and Capital Markets Solutions Conference, Taipei, 21-22 September OLIS 50th Anniversary Life Insurance Symposium, Tokyo, 25-26 October 36th FIDES Conference, San Salvador, 12-15 November 27th CNSF International Conference, Mexico City, 16 November 28th Pacific Insurance Conference, Hong Kong, 19-22 November 20th ASEAN Insurance Regulators’ Meeting and 43rd ASEAN Insurance Council Meeting, Vientiane, 21-24 November 4th NAIC Asia Pacific International Forum, Honolulu, 29 November – 1 December

Makoto Okubo (m-okubo@nipponlifeglobal.com) Asia Pacific Financial Forum (APFF) An Overview of APFF Work Related to Retirement and Long-term investments For more details on the APFF, visit mackglobe.com or email Makoto Okubo (m-okubo@nipponlifeglobal.com) 18