NETHERLANDS - The French-initiated reversal earlier this week on the European solvency framework, known as Solvency II, continued at the Pensioen Forum 2008 in Rotterdam, as experts have pleaded for a single solvency framework.
Falco Valkenburg, chairman of the investment and financial risk committee at the Groupe Consultatief Actuariel Europeen and partner at consultancy firm Towers Perrin, told delegates on Tuesday Solvency II constitutes a "good basis" for a framework for risk.
Pleading for a single framework for the entire financial sector - pension funds, insurers and banks included - Valkenburg said a single framework would be logical from a technical point of view.
In a reaction to his presentation, Theo Nijman, academic director of Netspar and author of a study showing Dutch pension fund buffers under Solvency II would remain on the same level as under the current FTK framework or even fall below, largely agreed with Valkenburg, though added the continuity analysis should have precedence over a solvency analysis.
Nijman's remark was prompted after Valkenburg made his case for more risk management among pension funds, claiming pension funds should spend more time examining their short-term risks to prevent what he described as recent scaremongering news headlines.
"Pension funds should look at their position almost daily; not to make daily adjustments, but to test how sensitive the scheme is to changes on the financial markets, and how effective the steering mechanisms are," said Valkenburg.
In a single framework for risk management, the questions remains how large the buffers should be, though Valkenburg argued the industry needs to choose a starting point.
"If we have the same risk, then [we should] have the same buffer. But if you do not have the same risk - and I think that Dutch pension funds are in many cases different from an insurance product because they can steer with, for instance, indexation and contribution rates - then you do not have the same risks, which should be combined with a lower buffer," continued Valkenburg.
He believes this scenario should not mean the entire framework needs adjusting, because different scenarios require different buffers.
Moreover, a single framework could mean the first step toward building bridges between the quarrelling pension fund and insurance industries, "not only in the Netherlands, but in Europe," he concluded.
Peter Borgdorff, newly-elected director of the €88bn Dutch sector-fund for the health care industry (PFZW) commented he is not against a joint framework, though worries about what he considered to be the unique Dutch position.
"The Dutch position is different from that in other countries, and even the UK and Ireland are not ‘pro' Solvency II. There is much pressure from Scandinavia for Solvency II. But do we not risk, if we are all in Solvency II, the specific Dutch situation - where pension funds have steering mechanisms - being marginalised and will we all be faced with very high buffers?" he qustioned.
Valkenburg agreed this could be a risk, though added there are currently studies to adopt elements from the Dutch system.