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The association argued that the differing approaches taken by individual Member States to calculate the components of the HBS could lead to different valuation outcomes and prudential conclusions. According to the association, the first QIS exercise conducted by the European Insurance and Occupational Pensions Authority (EIOPA) highlighted that a number of components within the HBS – such as the "strong" dependence on credit ratings and the fact some pension funds use deterministic calculations, as opposed to stochastic valuations – could increase risk for occupational pensions.
Additionally, it stressed that the interaction between elements of solvency capital requirements (SCR) and the HBS could lead to "inconsistencies". The organisation stressed that such a scenario would be "undesirable and counterintuitive", as it would lead to a decrease in pension rights over the short term – in order to enable pension schemes to grant additional pension rights over the long term. The submission questioned the feasibility of implementing an HBS within the revised IORP Directive as a supervisory tool.
Full article (IPE registration required)