“EIOPA is now preparing a pensions stress test. We are taking a two-stage approach: preparatory work in 2014 and running the stress test in 2015," EIOPA's Chairman said.
Gabriel Bernardino, EIOPA’s Chairman, delivered a speech at the NAPF Conference in Liverpool entitled “EIOPA’s vision on private pensions: Enhanced sustainability, strong governance and full transparency”.
"Our aim is to develop a stress test framework that is appropriate and suitable for pension funds," Bernardino explained.
An important part of the preparatory work is to gain insight in the role of IOPR’s in financial stability. To analyse transmission channels of IORP’s to financial markets, EIOPA will soon start a data collection exercise covering a sample of defined benefit, hybrid and defined contribution schemes in member states with a significant IORP sector, including, of course, the UK. This exercise will allow us to assess the pro-cyclicality of pension funds investment behaviour during the past decade, including the financial crisis in 2008. We would be very grateful for the participation of the UK pension funds in this exercise.
The stress test will assess the resilience and the behaviour of IORP’s in adverse market developments, such as a prolonged low interest environment or a sudden material reassessment of risk premia. It will also incorporate stresses in longevity as one of the major risks in pension funds overall financial condition. Our intention is that the pension stress test will cover IORP’s that provide defined benefit schemes as well as the ones that finance hybrid or defined contribution plans. We will conduct the stress test in parallel with the quantitative assessment on the solvency side in order to avoid the duplication of calculations. This will limit to the extent possible the burden on pension funds and supervisory authorities.”
Full speech
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