NETHERLANDS - SBZ, the €2.2bn pension fund for care insurers, has seen its funding level fall to 102.5% this week, on the back of increasing liabilities attached to long-term interest rates.
Peter van Gemst, chief investment officer at the voluntary industry-wide scheme, said its financial position has also worsened because of recent developments on the equity markets.
"Although the equity markets only dropped a few percentage points last week, it was mainly the decrease of the long-term interest rates that affected us," said van Gemst.
"The 30-year rate on Dutch government bonds has dropped by 0.4% to 3.95% -considerably increasing our liabilities," he pointed out.
SBZ's required cover ratio, including a mandatory financial buffer, is 118% while the scheme actually needs a minimum cover ratio of 105% for its funding.
The scheme had to inform pensions regulator De Nederlandsche Bank at the end of October that its funding ratio had dropped below 118%.
This required SBZ to submit a plan on how to recover it mandatory buffers within 15 years.
However, a further funding shortfall in the meantime means the scheme must now tell the DNB how it will fill the funding gap within three years.
In the consecutive weeks since the end of October, SBZ's has reported cover ratios of 112%, 115%, 111% and 107.5% respectively.
The scheme closed the first half of 2008 with a cover ratio of 145%.
"A long-term interest rate of 4.95% compensated for the decreasing equity markets by then," Van Gemst explained.
SBZ's assets were €2.6bn at the end of 2007.
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