What should we do about this? Based on the analysis and evidence we have reviewed, we think we need to take some steps now to guard against these problems with the MA leading to an insurer getting into trouble in the future. As part of the wider package of reforms under consideration, we think those steps should also support the government’s investment objectives. This should occur in one or both of two ways. First, our analysis indicates to us that the combined effect of the reforms – in particular loosening the risk margin while tightening the MA – should free up a significant amount of capital for insurance companies across the sector, which they could choose to re-deploy into investment if their boards support that course of action rather than returning it to shareholders. [11] We think that on recent economic conditions – specifically, those at both year-end 2020 and yearend 2021 – the amount of capital released would be equivalent to 10-15% of the current capital held by life insurers, which could support between £ and £ in additional investment in the economy. In higher interest-rate environments the figure would be a bit lower, simply because the risk margin in its current form shrinks as interest rates go up and therefore the large cut we propose releases less capital when rates are higher. But we think it is still a material release – for instance we estimate it would be 5-7% under one long-run 'rates up' scenario.
BIS Review 64/2006  1  where savings and investment needs are matched through the exchange of assets or instruments on financial markets. In the last decades, in industrialized and, more recently , in emerging economies, financial markets have played a growing role in the allocation of savings, a process commonly designed as "disintermediation". Has disintermediation increased or decreased the efficiency of financial markets? Or, in other words, is there a superior type of financial structure, an optimal mix of financial intermediaries and markets for promoting long-run economic growth? This “century old debate”, to quote Ross Levine, has received conflicting answers 3 . •  According to the “intermediary-based” view, banks are more growth-enhancing than markets, particularly in the early stages of development, because they are better at monitoring firms and better equipped for reducing moral hazard. According to the “market-based” view, markets are inter alia more suited than banks to finance innovative and high-risk projects. •  Against this background, it could be tempting to establish a link between the acceleration as from the mid 1990s of productivity growth in the United States, in line with gains arising from the production and use of ICT (information and communication technology) and the marketdominated American financial system. During the same period, productivity growth slowed down in two major bank-dominated areas, Europe and Japan. •  However, empirical research argues that distinguishing countries by financial structure does not help in explaining cross-country differences in long-run economic growth 4 .