The Bottom Line / Swimming Against the Stream

Over the past few months, Finance Minister Silvan Shalom's bureau has been considering the possibility of replacing Insurance Supervisor and acting capital market supervisor Eyal Ben Chelouche. This followed pressure exerted by parties in the insurance and pension industries who are opposed to Ben Chelouche's attempts to press ahead with reforms in these sectors.

In the insurance sector over the past three years, Ben Chelouche has continued to advance the reform in the compulsory vehicle insurance market that is scheduled to terminate the operations of the compulsory insurance company Avner by the beginning of 2003. Avner's chairman, former Likud MK Michael Ratzon, is opposed to the way the supervisor has chosen to terminate Avner and believes that the company itself should be allowed to sell its insurance portfolios. Ratzon is considered one of Ben Chelouche's leading opponents and some claim he is exploiting his political connections with Shalom to try and oust the supervisor. Ratzon avows that his motives are purely professional.

In the pensions sector, Ben Chelouche is leading a move to nominate appointed managers for the Histadrut labor federation pension funds, which are suffering from heavy actuarial deficits. The aim of the move is to appropriate the Histadrut's control over the pension funds in order to restructure them.

Ben Chelouche has pressed ahead with the reforms with his position hanging in the balance. Despite the fact that he has already served as capital markets supervisor in a temporary capacity for six months, Shalom has yet to make the appointment permanent and so far has sufficed with a three-month extension. Shalom's confidants claim that Ben Chelouche does not know how to create solutions; as far as the minister is concerned, there are too many issues on the table that invite pressure from various lobbies, they say.

Shalom would rather have these issues removed from his agenda, so over the past few months he has been searching for an alternative candidate who would come from the private sector and would know how to provide quick solutions. So far he has not found one.

Ben Chelouche is considered to be a top professional and in many respects is thought of as a successor to Doron Shorer, who recruited him to the insurance supervision department six years ago as his deputy.

In recent years the capital markets, insurance and savings department has undergone a revolution, particularly with regard to the insurance sector. In the early `90s the industry suffered from the collapse of several companies and the formation of a cartel which led to the indictment of several senior insurance executives.

Under the helm of the two previous supervisors, Tsippi Samet and Doron Shorer, the department led several important reforms in the investment sector and vehicle and life insurance sectors. Accounting reports improved as did reports to policy-holders, although the reforms are still in progress and the gap between the level of supervision in the insurance sector and the banking sector is narrowing.

Pressure on the finance minister to oust Ben Chelouche casts a cloud over the department's work and could lead to a regression in supervision of the capital markets and the insurance sector. To maintain the achievements of recent years, to continue the momentum and to prevent a return to the dark days of the `90s, the finance minister must ignore the pressure and speak out in favor of reforms.