IPE Awards: Solvency II scepticism widespread even among supporters
IPE AWARDS - Three-quarters of delegates attending the IPE Awards seminar in Monaco have voted against a motion claiming that 'Solvency II is the best thing for European pensions', a position defended by Danish first-pillar fund ATP.
Chresten Dengsoe, chief actuarial officer at ATP, said: "Solvency II will help us keep every pension promise made so far and make sure future promises can be kept - we need to have the right mechanisms to keep these promises."
His €70bn first-pillar funded scheme does not fall under the EU Insurance Directive, but he said it would "comply on a voluntary basis" and was in fact already doing so.
However, even Dengsoe stressed he could not agree with all of Solvency II and highlighted what he saw as several faults in the draft, including the complexity of the so-called 'standard model', the lack of proper aggregation of risks and the fact mortality and longevity are tested by means of relative shocks.
"But we should not measure it in some perfect world," Dengsoe said. "On balance, Solvency II will improve transparency, reporting, risk measurements and capital adequacy in European pensions."
Bringing forward arguments against the motion was Christian Böhm, chief executive at the Austrian pension fund APK and vice-chairman of the EFRP.
He said: "I see no positive effects on risk assessments, asset allocation or consumer protection, and the costs of delivering pension promises will increase significantly - in fact, I see no positive effect in applying Solvency II to IORPs."
Among his major criticisms was an increase in reporting requirements, including the creation of "thousands of pages of documentation sent to authorities without knowing what they will be doing with them" without adding value to the pension fund itself.
He also reiterated the argument, put forth by many occupational pension organisations including the EFRP and Germany's aba, that pension funds and insurance companies are completely different entities, with a very different make-up.
For the future of pensions under Solvency II, Böhm painted a very grim picture.
"A mechanical application of Solvency II threatens financial stability," he said. "It would create systemic risks, have cyclical effects and increase costs for employers, who in turn might lower their contributions leading to lower pensions."
Hugo Lasat, chief executive at Amonis in Belgium, agreed.
"I am very worried about Solvency II," he said. "I hope we will have some kind of proportionality and not just 'edit-copy-paste' from another sector."
Another one of Böhm's fears is that Solvency II will lead pension funds away from market-driven decisions into a political world driven by supervisors and authorities.
A representative from a French pension fund in the audience said he feared Solvency II would force his fund to start matching regulations instead of matching liabilities.