Alternatives to Investor Compensation Schemes and their Impact

15-11-2012

This study investigates whether private insurance contracts can be a substitute to investment compensation schemes (ICS). Starting by describing the scope of events (fraud, administrative malpractice, operational error and bad advice) which are covered by ICS, the study continues to analyse whether existing insurance products offer cover for this. Then the authors analyse the economic advantages and disadvantages, costs and legal challenges of partially and/or fully substituting ICS with private insurance. Finally, they investigate the consequences of taking out insurance for systemic risk and comment whether transparency towards investors is beneficial.

This study investigates whether private insurance contracts can be a substitute to investment compensation schemes (ICS). Starting by describing the scope of events (fraud, administrative malpractice, operational error and bad advice) which are covered by ICS, the study continues to analyse whether existing insurance products offer cover for this. Then the authors analyse the economic advantages and disadvantages, costs and legal challenges of partially and/or fully substituting ICS with private insurance. Finally, they investigate the consequences of taking out insurance for systemic risk and comment whether transparency towards investors is beneficial.

Awtur estern

Anne-Kathrin BARAN (Centrum für Europäische Politik), Jochen BIGUS (Freie Universität Berlin), Philipp ECKHARDT (Centrum für Europäische Politik) and Bert VAN ROOSEBEKE (Centrum für Europäische Politik)