SWEDEN - The Finansinspektionen (FI), the Swedish Financial Supervisory Authority, has confirmed the buffer capital of Swedish pension funds declined at the end of 2008, and three funds reported a 'red light'.

In its quarterly update on the traffic light indicator of pension fund solvency, the FI stated although the pension firms' capital buffers declined in the fourth quarter of last year, the overall status was "satisfactory" as the companies' margins "have been sufficient during the autumn's drastic drop on the stock market and the largest decline in long-term interest rates in a hundred years".

That said, the figures confirmed three occupational pension funds reported a red light under the traffic light system, which aims to identify at an early stage pension companies which have such high levels of risk exposure they cannot "with sufficient security fulfil their commitments to customers".

The FI said the pension companies with a 'red light' accounted for approximately 2% of the total pension market, although it highlighted these firms "do have the capital required by law and the guaranteed pension payments are not threatened".

It added the supervisory authority is in contact with the pension funds "in order to ensure that they can manage their risks", but added since the start of 2009 long-term interest rates have increased, which is favourable for the pension companies.
 
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