Denmark’s Danica Pension has been issued a series of official orders by the Danish FSA (Finanstilsynet) to improve certain procedures, including the continuous value assessments of parts of its alternatives portfolio, among other functions.
The Danske Bank pensions subsidiary said it had already been addressing the areas of concern flagged up by the financial watchdog, following the inspection it carried out at the firm in May and June 2019.
Ole Krogh Petersen, Danica Pension chief executive officer, told IPE: “Of course, we take note of the Financial Supervisory Authority’s orders, and we are already living up to several of them, and we are in full swing ensuring we live up to the remaining issues.”
The FSA said its inspection last year had included the areas of management and organisation, investment, risk management, solvency, the insurance business and outsourcing.
Among the orders Danica Pension received as a result was one relating to alternative investments, namely to ensure that the ongoing valuation was based on processes and methods using relevant market input as much as possible rather than company-specific inputs.
The watchdog said the pension fund’s ongoing valuation of unlisted debt instruments was based on a method that meant large market fluctuations had to take place before the valuation was changed.
An official order was also issued regarding the work of the company’s supervisory board.
In its report, the FSA said: “The company received orders to ensure that the capital structure policy contains strategic goals for the capital structure, including the identification and delineation of the risks the company wishes to take.”
Danica Pension was also penalised for using investment guidelines for one of its funds that were too broad, which risked the fund not matching the risk profile advertised to customers.
Other criticisms levelled at the Copenhagen-based pension provider by the authority included a lack of overall risk group assessments and inadequate capital planning.
On the latter issue, it made the point that Danica Pension needed to include projections of capital requirements and capital base that should take account of the stress of significant risks that the company was or may be exposed to.
Last week, the Danish FSA asked the country’s pension funds to begin reporting solvency coverage on a weekly basis to monitor developments in the sector in response to the COVID-19 outbreak and its impact on financial markets.