Austria introduces stress tests, ratings rules for pension funds
Austrian pension funds, from next year, will have to stress test their portfolios to assess the risk of their having to cut benefits.
Currently, Pensionskassen in the country’s second-pillar system are allowed to cut payments if they fail to achieve the discount rate applied for calculating liabilities.
However, under the new RIMAV-PK – the amended risk-management directive for Pensionskassen – schemes will have to stress test individual groups within their portfolios according to their risk profiles.
Originally, the amended RIMAV was to come into effect this year, but the pension industry was given more time to adapt their systems.
Under the new amendment, pension funds will also have to install models for assessing credit risk, ensuring there is no “excessive dependency” on external ratings, or that such ratings do not encourage “automatic actions”.
Separately, Pensionskassen must also be able to document that they have complied with the PKG pension fund law when using derivatives.
A minor change concerns the term Risikomanagement-Handbuch, or ‘risk management manual’, which will be changed to ‘internal guidelines’, in accordance with the term for similar tools in other financial industry segments.
In other news, actuarial consultancy arithmetica has issued its latest survey of pension liabilities of listed Austrian companies.
The 2014 figures show that liabilities more than doubled to €737m, due primarily to low interest rates.
Christoph Krischanitz, managing director, said the “unexpectedly strong” decline in interest rates was a “burden” to Austrian companies.
However, he added that the “risk-bearing capacity” of listed Austrian companies remained strong, albeit “a little weakened since last year”.
In total, only 32% of total liabilities of companies listed in the Austrian stock market index ATX are transferred to Pensionskassen or insurers – the rest remains on companies’ books.