20 SEP 2010
By William Hutchings | Financial News
As a sensible guideline for nannies, “safety first” has been proving its worth since at least the middle of the 19th century.
Its value as an investment rule is more questionable. But pension schemes fear the European Union is set to extend a law that will make the guideline their governing principle – with severe consequences both for pension schemes and the economy as a whole.
Solvency II is a European directive that takes effect in January 2013 and is aimed at reducing liquidity risk in the insurance industry. Concerns about the directive have been crystallised by decisions announced in the past month by a pair of continental European pensions providers.
At the end of August, Denmark’s financial sector pension fund, FSP Pension – which is organised as an insurance company – said it had increased the hedging on its Dkr24bn (€3.2bn) portfolio. Steen Jorgensen, a director of FSP Pension, said this reduction in risk was made in anticipation of the directive, even though another two years have yet to pass before it enters into force.
Jorgensen said: “Solvency II will reduce pension companies’ ability to invest freely.
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