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French fund considers cross-border vehicle, but only if IORP amended

EUROPE - French pension fund provider AG2R La Mondiale has said it would be willing to launch a cross-border pensions vehicle, but only if the European Commission provides some guaranties on the revised IORP directive.

Michel Denizot, international activities director, told IPE that AG2R La Mondiale’s IORP fund - which would focus exclusively on France and not seek external business in Europe - could cover all the assets under the second and third pillars managed by the French pensions provider.

The move would therefore follow the recent decision by UMR Corem, another French pensions provider, to set up a defined contribution cross-border vehicle, operating under Belgian law, by mid-2012.

However, Denizot stressed that AG2R La Mondiale would launch the fund only if the European Insurance and Occupational Pensions Authority (EIOPA) reconsidered the revised directive for institutions for occupational retirement provision (IORP).

“However, if the European Commission decides to go ahead with the Solvency II capital requirements within the new IORP directive, we will then retain our products as they are.”

The launch of an IORP fund could also be subject to other restrictions, according to Denizot.

“Our French clients mainly want guaranteed pension products, which would be backed by our insurance business,” he said.

“But since the insurance unit will already have to comply with the new Solvency II requirements, the cost that will rest with the provider AG2R La Mondiale for operating such an IORP vehicle will be too high.” 

If launched, the fund would be likely under Luxembourg law due to the linguistic links with France, as well as the insurance activities AG2R La Mondiale has already undertaken in the country.

Denizot added: “The interest of launching a cross-border in Luxembourg also comes from the diversity of IORP vehicles.”

The country currently offers three cross-border pension funds: the Pension Savings Company with Variable Capital (SEPCAV), the Pension Savings Association (ASSEP) and the CAA fund.

The Commission de Surveillance du Secteur Financier oversees the first two, while the third lies within the framework of insurance legislation.

According to Denizot, it would therefore be simpler to launch a CAA fund in order to work with a single, common regulator in France and Luxembourg.

However, he acknowledged the relatively “nonexistent” pensions market in Luxembourg vis-à-vis Belgium, where several pension schemes are already in place.

In addition, Luxembourg has failed to attract EU cross-border pension activity since the law on international pension fund vehicles was passed in 1999, he said.

Martine Van Peer, actuary at Esofac Luxembourg and a member of the EIOPA Occupational Pensions Stakeholder Group (OPSG), told IPE that the current difficulties the country faced to attract such funds were mainly due to social labour laws and fiscal issues.

“It is the role of the European Commission to facilitate the launch of IORP vehicles by harmonising laws between member states,” she added.

“It is clear the new propositions on the revised IORP directive - including the Solvency II capital requirements - are not appropriate to facilitate their development, as the regulation currently appears as too costly and restrictive.”

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