As is known, the European Commission excluded new capital requirements within the new regulation IORP II. However, Sweden’s financial supervisory authority, Finansinspektionen (FI), have been imposed to leave a suggestion regarding national capital requirements for occupational pension funds – beyond the mandatory requirements of IORP II.
FI shall suggest on a suitable structure of a standard capital requirement, a risk sensitive capital requirement and requirements on own funds. Amongst other things, this includes proposing a suitable time horizon and level of protection of the calculation of the risk sensitive capital requirement, map out the possibilities for insurance companies with occupational pension services to adjust their future commitments, examine group solvency aspects for the proposed capital requirements and to suggest on an eventual division of the own funds into different tiers and how the items in the own funds should be decided and valued.
FI are also set out to analyse potential consequences of the new capital requirements on the beneficiaries, employers, occupational pension funds, insurance companies and the financial markets. This will be done via a survey sent out to Swedish occupational pension funds containing a compilation of the own funds as well as stress tests for pension risk, operational risk, counterparty risk and market risk with the sub-groups of stock, interest, spread, currency, property and concentration risk. FI point out that the structure of the capital requirements and the own funds used in the survey is not to be seen as conclusive, but instead the stress tests together with qualitative questions aim to assist in the assessment of suitable capital requirement levels.
Needless to say, the environment of occupational pension funds are changing; with the implementation of IORP II in Europe in general and with the development of new capital requirements in Sweden in particular. Hence, it will be interesting to follow FI’s work on this going forward and to see the final structure of the capital requirements and its implications for Swedish occupational pension funds.