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Pensions get 'green light' over market turbulence

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  • Pensions get 'green light' over market turbulence

SWEDEN - The Finansinspektionen (FI) has confirmed no company received a red light under the Swedish traffic light system for the last quarter of 2007, despite continuing market turbulence.

The Swedish Financial Supervisory Authority revealed latest reports from pension companies, based on figures to December 31 2007, show "they can withstand further turbulence in the financial market".

In total, the FI received 318 reports for Q4 2007, 60 of which were filed by life insurance companies and occupational pension funds, but none resulted in a "red light" classification, the only exception being the pension fund Prometheus, which has been in the red light zone since 2006 and has been ordered to modify its investment focus.

These latest figures follow concerns raised by the FI last month, when it requested an additional report from companies based on November 30 figures "because of the instability of the financial market during the fall".

Although just 37 companies filed the additional information the FI said all companies "have a solid margin to the red light" and claimed, in general, pension companies could withstand further turbulence on the financial markets, a statement borne out by the regular December figures. 

The traffic light model measures the exposure of insurance companies and pension funds to extreme price fluctuations on the financial markets so the FI can identify, at an early stage, companies which have such high levels of risk exposure there is not "sufficient security" to fulfil financial commitments to customers.

The system first calculates a capital buffer based on the fair value of both assets and liabilities, the company is then subjected to a number of fictional stress scenarios, and if the buffer is not sufficient, the model shows a red light and the FI then conducts more in-depth measures.

The next reporting update will be available on May 15 2008, and will refer to figures from April 21 2008.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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