2009-02-12
PRESS RELEASE
The pension companies' capital buffer continues to decline but is still satisfactory, according to the traffic-light reporting for Q4 2008. The pension companies' margins have been sufficient during the autumn's drastic drop on the stock market and the largest decline in long-term interest rates in a hundred years. Since the turn of the year, however, the long-term interest rates have risen which is favourable for the companies.
Three occupational pension funds are reporting a red light in the traffic-light model. These pension companies account for approximately two per cent of the total pension market. The companies, however, do have the capital required by law and the guaranteed pension payments are not threatened. FI is in contact with these companies in order to ensure that they can manage their risks.
Background
The traffic light is a supervisory tool and not a formal regulatory regime. It aims to identify companies that have large exposures against financial risks and insurance risks in relation to their capital. The objective is for FI to identify at an early stage companies that have such high levels of risk exposure that they cannot with sufficient security fulfil their commitments to customers.
Examples of fluctuations that the companies should be able to withstand include:
- Swedish shares: -40 per cent
- Real estate prices: -35 per cent
- Long-term interest rates: +/-30 per cent
- Credit risk: A doubling of the spread, although at least an increase of 25 basic points
- Longevity risk: The one-year mortality probability is reduced by 20 per cent for all ages
An occupational pension fund is a special type of mutual benefits society which administers occupational pensions.
