The largest of Sweden’s occupational pension providers has decided to take the same route as other pension funds and apply to convert its regulatory status, moving away from the Solvency II-based regime in favour of IORP II rules.

Alecta announced yesterday evening that its supervisory board (överstyrelsen) had decided to approve the company’s proposal to apply for conversion to an occupational pension company (tjänstepensionsföretag), with the new status to take effect on 1 January 2022.

The decision follows last month’s announcement by the country’s second-largest occupational pension provider, AMF, that it would apply to the Swedish FSA (Finansinspektionen) for the conversion.

As part of the conversion, Alecta will change its name to Alecta Tjänstepension Ömsesidigt (Alecta Occupational Pension Mutual) from Alecta pensionsförsäkring, ömsesidigt (Alecta Pension Insurance, mutual).

At one stage in the Swedish process of implementing the EU’s IORP II directive on regulation of pension institutions in member states, Alecta’s chief executive officer Magnus Billing criticised the rules that were being considered as involving high risk-free capital requirements could weaken protection for consumers.

Talking about yesterday’s decision, Billing told Swedish news service Pensioner & Förmåner that it had not been obvious from the start that Alecta would be transformed into an occupational pension company.

“When we saw the draft regulations, it was not entirely to our advantage. Now some changes have been made to the regulations, the final bill came just a few months ago, we believe the advantages now outweigh the disadvantages,” he said.

Some parameters had been crucial in Alecta’s decision to apply, he said, including the firm’s investment activities and the design of the capital requirement.

“The second parameter concerns the possibility for the social partners to continue to provide information on collectively-agreed occupational pensions,” he said.

“When it comes to investments, occupational pension legislation gives our businesses greater room for manoeuvre regarding risk,” Billing said, adding that it had also been important that only minor parts of the “blunt” money-laundering regulations affected collectively-agreed occupational pensions.

In the Swedish national implementation of IORP II, the risk-based capital requirement is calibrated at a value-at-risk of 97% – lower than the 99.5% set out by the EU.

Alongside AMF, other pension providers to have made the change or applied for it include KPA Livförsäkring, Kåpan pensioner, and SPK – Sparinstitutens Pensionskassa.

Alecta reported its first quarter results this morning, which revealed that the group solvency ratio had continued to pick up from a year ago to stand at 181% at the end of March.

This compares to 167% at the end of December 2020, and 149% at the end of March 2020 immediately following the stock market plunge that greeted the pandemic.

The default portfolio in Alecta’s defined contribution product, Alecta Optimal Pension – which has a 60% equities weighting – generated a 6.9% return in the first three months of the year, while Alecta’s defined benefit pension operation ended the first quarter with a 4.1% return, according to the interim financial results.

Total assets under management rose to SEK1.09trn (€107bn) at the end of March from SEK1.04trn at the end of December.

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