EUROPE – The European Insurance and Occupational Pensions Authority (EIOPA) has conceded that Brussels' "ultimate objective" is to use the revised IORP Directive's holistic balance sheet (HBS) as a way of establishing funding requirements for pension schemes, but the authority has insisted it needs to conduct further impact assessments.

Sending its preliminary results on the first quantitative impact study (QIS) to the European Commission, EIOPA noted it had originally proposed the controversial HBS approach with the aim of achieving a common level of security for all IORPs across Europe.

EIOPA went on to say that the Commission's "ultimate objective" was now to use this HBS approach to establish funding requirements for all occupational pension schemes in Europe.

The pension industry has strongly opposed elements of the HBS approach. In a speech at German industry association aba annual meeting last year, Heribert Karch, chairman of the association claimed that the HBS would represent a "danger" to occupational pensions.

In its preliminary results, EIOPA also stressed that even though the first QIS provided insight in the workings of the HBS approach, its results should be treated with caution.

"The reported values for the balance sheet items and capital requirements should be recognised as rough estimates surrounded by a lot of uncertainty," EIOPA added, echoing previous comments that the QIS had revealed a number of "inconsistencies".

According to the authority, the fact that IORPs participating in the first QIS based their calculation on existing policies and national supervisory frameworks could lead to approximated responses.

The authority therefore insisted on the need to conduct further QIS exercises, allowing it to fully assess the quantitative impact of the HBS approach.

The first QIS ran over three months from mid-October to mid-December, covering eight European countries: Belgium, Germany, Ireland, Netherlands, Norway, Portugal, Sweden and the UK.

The first QIS exercise included a detailed qualitative questionnaire in which
IORPs participating were asked to make assessments of the calculation processes for the different parts of the HBS approach and the solvency capital requirement.

EIOPA stressed that it was still in the process of analysing those results, which were not included in the preliminary responses the authority sent to the Commission today. The authority said it expected to publish a final report by the end of June this year.

Dave Roberts, senior consultant at Towers Watson, told IPE that the preliminary report by EIOPA cast "further doubt" on the Commission's aspired timetable for a draft Directive, this summer.   

"If it is to achieve this, which would seem crucial to steering proposals through the legislative process within the current European Parliament, it is difficult to see how capital requirements can be included," he said.

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