EUROPE - Solvency II will load a very high cost on European occupational pension schemes, according to Jaap Maassen, chairman of the European Federation for Retirement Provision (EFRP).
The future solvency regime, known as Solvency II, will be a serious threat to affordability if applied mechanically to institutions offering occupational retirement provision (IORPs), suggested Maassen, a member of the ABP Dutch pension fund executive board, at the fund's European Pension Summit in Heerlen yesterday.
"As far as I am concerned [Solvency II] is a devil in disguise," said Maassen.
If there was a devil in relation to Solvency II, suggested Henrik Bjerre-Nielsen, director general of Danish Financial Services and a former chair of CEIOPS, this "devil was in the detail" of the initiative.
Speaking at a later session dedicated to Solvency II issues, he said he was in favour of applying the new insurance regime to pensions covered by the IORPS directive.
"I am no enemy at all of occupational pensions," he said, pointing out he had been a trade union negotiator on pensions issues in Denmark, during his career.
Supervision should not be concerned with the nature of the promise being made, but once a provider made a promise then it had "to be backed up".
Describing Solvency II as the coming European prudential regulation and supervision of insurers, Bjerre-Nielsen regards it as a "major step forward" as he believes it will bring insurance supervision in line with the prudential regulation of European banks and securities firms.
IORPS, he pointed out, are in many ways regulated as life insurers.
So should they continue to be subject to equivalent regulation when Solvency II was implemented? And if they are regulated in this way, should all occupational pension funds be so regulated? In his view, the answer was ‘yes' to both questions.
If this were to happen, Bjerre-Nielsen said under Solvency II pension funds will be able to invest in the same asset classes as today and "provided they have the required financial strength, they need not change their asset mix".
He noted the Danish pensions sector had adopted a ‘Solvency one and a half' regime during the summer, while ATP has set up a system running very much in accord with the Solvency II approach.