24 April 2019

Investment & Pensions Europe: German supervisor disagrees with EIOPA over IORP inspection cycle

The recommendation was one of 27 that the European Insurance and Occupational Pensions Authority (EIOPA) issued for national supervisors in 16 countries following a peer review of how national authorities ensured that IORPs invested their capital in the best interest of their members and beneficiaries.

EIOPA said it would assess how the “national competent authorities” (NCAs) complied with the recommended actions and “continue its work to improve supervisory practices in this area at European level”.

Twelve of the recommended actions were of “low” importance, nine of “medium” importance, and six of “high” importance, according to an EIOPA grading system.

The recommendation addressed to BaFin about the length of its on-site inspection cycle was marked as of “high” importance.

According to EIOPA, the frequency of on-site inspections related to the prudent person rule varied significantly from national supervisor to national supervisor, depending mainly on “the applicable legal framework, the pension landscape in a country and NCA resources”.

However, the average was every three to six years and EIOPA considered that “a lack of or low frequency of on-site inspections constitutes a shortcoming in existing supervisory processes”.

In Germany, BaFin conducted on-site inspections at least every seven to 12 years depending on an IORP’s “classification in the risk categorisation tool”. According to EIOPA, it should increase the cycle to conduct more inspections, again depending on the risk classification.

BaFin availed itself of national authorities’ right to submit a written statement where they have “strong objections” to a recommended action or finding.

In its statement, which was included in EIOPA’s report, the supervisor said it considered it appropriate to stick to its current audit cycle, as this was compensated by a range of “risk reduction mechanisms”.

These included the existence of additional qualitative and quantitative rules about investment by Pensionsfonds and Pensionskassen, and a comprehensive reporting system – already in place for the latter and in the works for the former.

BaFin also noted that Germany, “unlike most other EU member states”, had granted insurance claims absolute precedence over any other claim with respect to assets representing the technical provisions, rather than “just” granting them a special rank.

Full article

© IPE International Publishers Ltd.