Featured Product

    DNB Examines Results of Stress Tests for Dutch Pensions Sector

    December 17, 2019

    DNB published results of the EIOPA stress testing exercise for the Dutch pensions sector. The results show that the financial position of the Dutch pensions sector is vulnerable to financial market shocks. A highly adverse stress scenario, which involves sharp equity price declines and rapidly widening spreads, showed that the year-on-year impact of a financial market shock on the Dutch economy through the pension funds is limited, but will be felt for many years.

    DNB disclosed the list of the stress test participants, which represent 60% of the Dutch pensions sector. The results of the stress test, which looks at the figures as of year-end 2018, show that Dutch pension assets appear to be vulnerable under a major shock. In such a scenario, the capital positions of Dutch pension funds are severely hit. This impact is due to the large portfolio of variable-yield investments they maintain to fund their indexation ambition. On average, the funding ratio of participating pension funds drops by nearly 23 percentage points, which roughly equals their required own funds. This means that the pension funds could have absorbed the impact of the shock almost fully using their buffers, had they maintained the required own funds. With the buffer lacking and the assumed funding ratio averaging 99%, the shock forces them to apply immediate benefit curtailments.

    The stress scenario sees assets of the Dutch premium pension institutions, or PPIs, drop by nearly 30%, primarily due to the equity shock. The premium pension institutions tend to allocate a large proportion of their investments to variable-yield assets on account of the relatively high share of young pension scheme members they represent. The stress test also considered the impact of the stress scenario on replacement ratios (excluding state pensions). The outcomes showed a large variety because the premium pension institutions differ widely.

     

    Related Link: DNB Analysis of Results

    Keywords: Europe, Netherlands, Insurance, Pensions, Stress Testing, Defined Benefit, Own Funds, Defined Contribution, DNB

    Featured Experts
    Related Articles
    News

    US Agencies Finalize Interim Final Rules Issued Amid Pandemic

    US Agencies (FDIC, FED, and OCC) finalized two rules, which are either identical or substantially similar to the interim final rules in effect and issued earlier this year.

    September 29, 2020 WebPage Regulatory News
    News

    EIOPA Consults on Use of Risk Mitigation Techniques Under Solvency II

    EIOPA is consulting on a supervisory statement on the use of risk mitigation techniques by insurance and reinsurance undertakings.

    September 29, 2020 WebPage Regulatory News
    News

    APRA Proposes to Increase Transparency of Banking Data

    APRA announced that it is resuming consultation on the confidentiality of data submitted to APRA by the authorized deposit-taking institutions.

    September 29, 2020 WebPage Regulatory News
    News

    BoE and FCA Encourage Switch to SONIA in Interest Rate Swap Markets

    BoE and FCA are supporting and encouraging liquidity providers in the sterling swaps market to adopt new quoting conventions for inter-dealer trading based on SONIA, instead of LIBOR, from October 27, 2020.

    September 28, 2020 WebPage Regulatory News
    News

    Bundesbank Updates Supporting Information for SHS Reporting

    Deutsche Bundesbank published special schema files for securities holdings statistics (SHS), along with a document on the XML format description.

    September 28, 2020 WebPage Regulatory News
    News

    EC Deems UK Framework for CCPs Temporarily Equivalent to EMIR Rules

    EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).

    September 28, 2020 WebPage Regulatory News
    News

    ESMA to Recognize Three Central Counterparties from UK

    ESMA announced that it will recognize three central counterparties (CCPs) established in the UK as third-country CCPs, from January 01, 2021.

    September 28, 2020 WebPage Regulatory News
    News

    PRA Publishes Version 02.04 of PRA110 Liquidity Metric Monitor Tool

    PRA published Version 02.04 of the PRA110 liquidity metric monitoring tool (PRA110 LMM tool).

    September 28, 2020 WebPage Regulatory News
    News

    LEI ROC Confirmed as Governance Body for OTC Derivatives Identifiers

    FSB confirmed the Regulatory Oversight Committee (ROC) of the Global Legal Entity Identifier System (GLEIS) as the International Governance Body for the globally harmonized identifiers used to track over-the-counter (OTC) derivatives transactions, with effect from October 01, 2020.

    September 25, 2020 WebPage Regulatory News
    News

    FCA Consults on Regulation of International Firms in UK

    FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.

    September 25, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5863