BEA Government Statistics Users Conference Government Insurance Programs Benjamin A. Mandel Bureau of Economic Analysis September 14, 2006

2 Introduction 1.Treatment of insurance services 2.Treatment of recent disasters 3.Government insurance team research 4.Related research 5.Questions and Comments

3  Insurance services  Services consist of financial protection through risk pooling, financial intermediation.  Insurance company’s sources of revenue from customers:  Actual premiums  Investment income from reserves attributable to the customers  Insurance company must pay:  Benefits for insured events  Expenses associated with production of services (compensation of employees, intermediate goods and services, operating surplus).  Value of service calculated as:  Premiums + Expected investment income – Expected benefits Treatment of Insurance Services

4 Example Insurance Services $80-$30=$50 Net insurance settlements $40-$30=$10

5 Government Insurance - Recent Hurricanes  Hurricanes 2004  State and Local  Current transfer receipts from business  Hurricane Katrina 2005  Federal  Current transfer receipts from business

6 Government Insurance Team  Research the implementation of the 2003 comprehensive revision changes.  Implicit services  Normal losses  Net insurance settlements

7 Government Insurance Team  Implicit Services  Premium Supplements Calculation  Geometric-weighted moving average of past investment gain/loss ratios multiplied by the premiums earned during the current period.  Investment gain/loss ratio is the net investment gain/loss on funds divided by premiums earned.  “Measuring the Services of Property-Casualty Insurance in the NIPAs” by Baoline Chen and Dennis Fixler in the October 2003 Survey.  Source data  Rate of return

8 Government Insurance Team  Normal Losses (Benefits Paid)  Calculation  Geometric-weighted moving average of past loss ratios multiplied by the premiums earned during the current period.  Loss ratio is the ratio of actual losses to premiums earned.  “Measuring the Services of Property-Casualty Insurance in the NIPAs” by Baoline Chen and Dennis Fixler in the October 2003 Survey.  Source Data

9 Government Insurance Team  Net Insurance Settlements  Possible NIPA changes  Government Expenditures  Current transfer payments “Net insurance settlements”

10 Other Research Issues  Enterprise Sectoring  Capital Transfers

11 Questions and Comments BEA Government Statistics Users Conference Government Insurance Programs Benjamin A. Mandel Bureau of Economic Analysis September 14, 2006