Eiopa to run pension stress tests

Eiopa to run pension stress tests

  • Export:

The European Insurance and Occupational Pensions Authority (Eiopa) has launched its first stress test for institutions for occupational retirement provision (IORPs).

The test aims to provide insight and raise awareness of the occupational pensions' sector risks and vulnerabilities, while potential transmission mechanisms of IORPs to the rest of the financial sector and the real economy will also be evaluated. Tests will be carried out in 17 European countries that have a least of their 50% national market covered by IORP sectors.

“Pension funds are already experiencing a challenging environment with low interest rates and rising life expectancy. A key vulnerability for the occupational pensions sector is a prolonged period of low interest rates combined with a fall in asset prices due to a re-appraisal of risk on financial markets. The stress test will retrieve valuable information on the sensitivity of IORPs, sponsoring undertakings and members and beneficiaries to such a scenario,” said Gabriel Bernardino, Eiopa’s chair.

Both defined benefit (DB) and defined contribution (DC) schemes will be covered by the test. DB schemes will have to calculate impact of scenarios on "a common holistic balance sheet" and their national balance sheet.

DC models will be assessed by a satellite module that analyses the impact of a variety of shocks on three representative plan members who will draw from their pension in five, 20 and 35 years from now.

A quantitative assessment will also be carried out in tandem with the stress tests to gather data of IORPs on potential uses of the holistic balance sheet within an EU-wide supervisory framework. The outcomes will support EIOPA in further developing its Advice to the European Commission on EU solvency rules for IORPs.

The quantitative assessment follows last year's consultation paper on IORPs solvency. In it Eiopa suggested proposals to simplify the valuation of 2/3 technical provisions and sponsor support using a principles-based approach. 

IORPs to be involved will be selected by national supervisors. Both exercises will run until 10 August 2015. Eiopa will deliver its Advice to the European Commission in March 2016.


  • Export:

Related Articles