SWITZERLAND - Swiss Pensionskassen fear there could be major financial burdens arising from the proposed application of the country's very own revised solvency regime for insurers, known as Swiss Solvency Testing.

They are not part of the EU but still Swiss pension funds are facing the same problems with new solvency regulations as their European counterparts, though possible pressures could come from Swiss Solvency Testing rather than European Commission (EC) insurance legislation known as Solvency II.

"ASIP could only agree to a modified solvency regime if it included the ability to take measures to fill a gap in the Pensionskasse," said Christoph Ryter, president of the Swiss pension fund association ASIP.

Ryter took part in a discussion yesterday, at the retirement provision fair in Zurich, on whether or not the application of the new solvency regime would "kill the second pillar" in Switzerland.

Ryter explained the solvency regime developed for insurers focused only on insolvency plans and did not leave room for ensuring the survival of an institution.

"The solvency regime was created in order to protect people who signed a contract with an insurer in case of the company's bankruptcy," he added.

Yet the situation is different in relation to Pensionskassen, he noted, as contracts can be transferred to a different provider.

He stressed pension funds were "not against new solvency rules" and should they prove themselves they should be analysed and adapted.

However, Peter Zanella of Watson Wyatt Switzerland, pointed out pension funds already had a lot of risk management instruments in place, which are part of the Swiss Solvency Testing such as ALM assessments.

Other parts of the debate also very closely resembled arguments put forward by the Swiss funds' European counterparts.

As within the EU, the Swiss regulator has been working on new insurance-related solvency criteria since the burst of the e-commerce bubble in 2000/2001 and is now considering applying it to other providers of retirement products.

But Zanella explained the new investment rules included in the Swiss Solvency Test would mean a considerable cut in equity exposure from current 35% on average among pension funds to under 20%.

In turn, funds would need more assets as they could make less use of opportunities on the capital markets, he suggested.

Ryter argued there was a difference between insurance providers of retirement solutions and Pensionskassen for a reason.

"People should have the choice of going into an all insurance product or join a Pensionskasse with a bit more risk but also more investment opportunities;" he said.

Applying the new solvency regime to both vehicles indiscriminantly would lead to Pensionskassen becoming more like insurance solutions, Ryter concluded.

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