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Norwegian pension funds return 10.7% in 2013 on strong equities

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Investment returns for Norway’s pension funds rose  nearly 3 percentage points to 10.7% last year due to strong equities performance, according to data from Finanstilsynet, the financial supervisory authority.

Returns for life insurers dipped slightly to 5.9% from 6%, the regulator said in its 2013 financial risk report, noting that life insurance companies hold significantly lower allocations to shares than the country’s pension funds (pensjonskasser).

Publishing the report, Finanstilsynet noted that returns for pension funds were above 2012’s 8% return.

“The main contributor was the stock market recovery,” it noted.

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It warned, however, that the uncertainty in the world economy was creating nervousness among investors, and could prompt a rise in risk premia on fixed income securities and a fall in share prices. 

Finansilsynet also said it would draw up recommendations for implementing Solvency II into Norwegian legislation this year. 

“Large portions of pension providers’ profits need to be devoted to strengthening financial positions up to the introduction of new international solvency rules,” It said. 

The new rules will take effect on January 1, 2016.

While the new EU requirements entailed a substantial need for capital among Norwegian life insurers, individual countries were allowed to apply long transitional arrangements, it said.

The regulator also said rising longevity and new mortality tables for life insurers and pension funds would require a big increase in premium reserves.

About half of this overall need for increased provisioning had been met through allocation of policyholders’ surplus achieved in 2011-2013, it said.

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