Norway is pushing ahead with a plan to introduce solvency requirements for pension funds along the same line as insurers, despite protests from the country’s pension sector.
The finance ministry announced earlier this month a new solvency requirement for pension funds, which it said would capture risk throughout a business. It is based on market values and is similar to the Solvency II requirements for insurance companies.
Siv Jensen, the finance minister, said: “The new solvency requirement ensures that the occupational pension is as secure in a pension fund as in an insurance company.”
She added that pension funds had many years of experience of the stress test behind the new rules, and were well positioned to meet the requirements from 1 January 2019.
However, Espen Kløw, secretary general of the Norwegian Association of Pension Funds (Pensjonskasseforeningen), told IPE: “The capital requirement is both unfortunate and unnecessary, and it is in conflict with the regulation in Europe, IORP II.”
He also highlighted the negative effect of the new solvency requirements on investments, saying: “After a fall in the equity market, combined with a reduced level of interest, pension funds have to sell equities – in a period when pensions fund should be buying equities.
“In the long term this will lead to lower returns, and thereby lower indexation of pensions and full-paid policies.”
At the consultation stage last year, the idea was met with a mixed response from stakeholders in Norway, while PensionsEurope has warned about about potential harm to the Norwegian system from solvency rules.
Within the new solvency regulations, the finance ministry said capital required to back pension funds’ investments in infrastructure would be lower than for other investments, provided they fulfil certain conditions.
Jensen said the infrastructure investment rules would ensure equal treatment with insurance companies and facilitate pension funds’ long-term investment in suitable infrastructure projects.
On top of this, she said, the government was putting forward a draft law allowing more flexible access to investments in so-called ‘non-insurance’ businesses, which could also lead to more infrastructure commitments.
Klow welcomed the new regulation, which would remove the current restriction that limits pension funds to invest a maximum of 1% of assets in each infrastructure investment.