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Impact Investing

IPE special report May 2018

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EIOPA confirms IORP solvency, HBS advice timeline

The European Insurance and Occupational Pensions Authority’s (EIOPA) 2016 work programme has confirmed the authority will by the end of March deliver its own initiative advice on solvency for IORPs and the use of the holistic balance sheet (HBS).

The advice constitutes a “product” that falls under the second of five strategic objectives for the authority, namely “to lead the development of sound and prudent regulations supporting the EU internal market”.

The work falls under the operational activity heading of “occupational pensions regulation”, identified as high priority.

This means it is a legal requirement that must be delivered this year and is “strategically aligned”.

The authority lists two other products for delivery in this context alongside the advice on solvency and the use of the HBS.

The first is “advice on IORP II: key input, on information to members and beneficiaries, and risk evaluation for pensions”.

There is no fixed due date for this, with delivery instead being “contingent on demand”.

The other product is “improvements to pensions data including via the Market Developments Report”, with a deadline of the fourth quarter of this year.

EIOPA’s work on occupational pensions “will be maintained with existing resourcing levels in 2016”, it said.

The work programme also has EIOPA delivering to the European Commission its advice on a single market for personal pensions.

Earlier this month, EIOPA launched a consultation on its final advice on the development of a so-called 2nd regime for pan-European personal pension products (PEPPs)

This year, EIOPA added a fifth objective to its work programme, which, unlike the others, is not based on the tasks and responsibilities the authority has been mandated in its regulation.

The fifth objective was added to reflect that “EIOPA’s operational success is dependent on its reputation as a capable, well managed and credible organisation”, according to the authority.

The objective is for EIOPA to act as a “modern, competent and professional organisation, with effective governance arrangements, efficient processes and a positive reputation”.

No decision on carbon-asset risk in stress tests

Meanwhile, a spokesperson at EIOPA told IPE it was too early to know whether carbon-asset risk would be included in the next stress tests on European occupational pension funds.

In a report published last week, the European Systemic Risk Board (ESRB) examined the potential risk of a late low-carbon transition and proposed that future stress testing of the financial sector by the European Supervisory Authorities (ESAs) incorporate the risk of a “hard landing” scenario.

EIOPA is one of three ESAs and, as noted by the EIOPA spokesperson, is represented at the ESRB, as the ESRB is at EIOPA.

“Market-adverse scenarios for both insurance and pensions’ stress tests conducted by EIOPA are developed in close cooperation with the ESRB,” said the spokesperson.

“The shocks against which the insurers’ in 2016 and IORPs’ balance sheets in 2017 will be stressed are not yet known.”

The final decision will be taken by EIOPA’s board of supervisory shortly before the stress tests are launched.

For the insurance sector, this will be in May 2016, while the timeline for the pensions sector stress test will be released in early 2017. 

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