SWITZERLAND – The 15.7 billion Swiss franc (10.2 billion euro) Civil Service Insurance Fund of the Canton of Zurich has reported a 11.9% loss for 2002, with the coverage ratio falling to 88%.
Continued falling prices in financial markets resulted in the scheme’s coverage ratio decreasing from 104% at the end of 2001 to 88% (about a 2.3 billion Swiss franc deficit) at the end of 2002, and an overall result on capital investment of –11.9%. But says, senior government officer, Christian Huber, the CSIF “is solid enough to ensure the financial security of its members”.
“The deficit coverage does not pose a concern for insured parties. The CSIF is primarily the pension vehicle for government employees and associated communities, there is therefore no danger that the fund would need to be liquidated today, tomorrow or in ten years,” Huber says in CSIF’s annual report.
“Since CSIF liabilities are not current but only unfold over a very long time-horizon, there is also no requirement for the fund to maintain 100% coverage at all times.”
Huber also highlighted that fluctuations in coverage ratio have been frequent since CSIF’s founding in 1926, and 100% coverage has only occurred from 1996 to 2001. The reduction in the minimum rate by the Swiss government will ease the pressure on the fund, but achieving 100% coverage will predominantly be dependent on a recovery of the equity markets, says Huber.
In 2002, Swiss equities returned –27.6% for the fund. Convertible bonds also performed badly, returning –15.3%. Swiss franc bonds returned 9.3%. Foreign currency bonds returned 4.7%
The fund has already adjusted its investment strategy. It 32% equity quota is to be reduced to 25% by the end of 2003.
The CSIF was planning to make the transition to a private trust as of 1 January 2004, but since law stipulates that this may only take place if the coverage ration amounts to at least 100%, the date for the split has been postponed.
The CSIF covers 57,910 insured parties, and has 18,733 pensioners.