Solvency II Lifeline Thrown to European Pensions

European pension funds have a chance to explain their fears over Solvency II as the European Commission calls for evidence.

(October 17, 2012) — Pension funds and their sponsoring employers fearing the onset of the Solvency II regulation in Europe have been thrown a lifeline as the European Commission (EC) has asked the sector’s retirement provision authority to examine the potential impact of the new rules.

The European Insurance and Occupational Pensions Authority (EIOPA) has been tasked by the EC to carry out a Quantitative Impact Study (QIS) for occupational pension schemes in the region, the organisations announced yesterday.

Several organisations representing occupational and corporate pension funds around Europe have rounded on European regulators over the potential impacts of Solvency II. The regulation had been initially created to ensure insurance companies held enough sufficiently liquid assets to cover any payments they had to make. The regulation was then mooted to cover agencies offering pension provision, sparking outcry and claims that Solvency II at best could cost employers and other pension providers billions of pounds and euros and at worst push companies into bankruptcy.

In its announcement yesterday, EIOPA said it had set out plans to gather information and case studies from corporate pension funds and other retirement benefit providers based in nine European countries.

Institutions for Occupational Retirement Provision (IORPs) from Belgium, France, Germany, Ireland, the Netherlands, Norway, Portugal, Sweden and the United Kingdom have been asked to produce information that will be collated by December 17.

The results of the exercise will be revealed in the spring of next year.

Gabriel Bernardino, chairman of EIOPA, said: “I am pleased that we have been able to take this important step in the development of a new European framework for occupational pension funds. In our advice to the EC we proposed the holistic balance sheet (HBS) concept as a means to capture the wide diversity of retirement systems in a single prudential regime. This QIS will allow us to investigate the feasibility of implementing the HBS in practice.”

Jerry Moriarty, chief executive of the Irish Association of Pension Funds, told aiCIO: “It is an important step and it is crucial that the full implications of the proposals are properly evaluated. This doesn’t only include the impact on individual schemes but also needs to consider the macro impact on the financial system.” 

Darren Philip, policy director at the UK’s National Association of Pension Funds, also welcomed the chance to test proposals set out under Solvency II and gauge their impact.

Philip said: “Imposing extra costs on pension schemes would force more of them to close, and could undermine jobs and investment at a time when the economy is struggling. Pensions are already well protected in the UK and we see no need for an extra layer of regulation.”

For details of what is required by EIOPA for the submissions, click here

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