Greek Social Security in the vortex of insurance risks

In the public debate on the social insurance in Greece, the fact that the insurance risk contained in an insurance system is equated with the investment risk of the financial markets and the capital markets raises questions and concerns. In addition, this equation is a significant theoretical and methodological error, in the sense that in modern portfolio theory, investment-financial risk consists of systemic risk inherent in each market and non-systematic risk.

Non-systematic risk involves the possibility of eliminating it with the technique of diversification, which in market terms is concentrated in the wording of professionals "we do not put all eggs in the same basket." In contrast, systemic risk is not differentiated but only hedged by various hedging techniques, such as the use of derivative financial products. In other words, insurance and systematic market risk are not differentiated but transferred.

An example of insurance risk transfer is reinsurance. Another example of insurance risk transfer used in retirement benefits is the purchase of annuities. From this point of view, it is worth understanding that according to the theory, actuarial mathematics and insurance economics (Pension Economics) claim that any insurance system that pays pension benefits is subject to demographic risk, whether it works with a distributive or a capitalization, or with some hybrid (distributive system of imaginary individual accounts) economic system.

This is because when considering the long-term viability of a pension system, whether it is a distributive or a capitalization system, it uses demographic projections and mortality tables (actuarial tables) as a key tool, through which the life expectancy is determined. In this context, the claim of...