Frankfurt.It’s about the money from retirees and future pensioners: “Pension funds are even more affected by the persistent low interest rate phase than life insurers,” says Germany’s top insurance supervisor Frank Grund (photo) and demands: “We need considerable support from employers as sponsors at some insurance companies. “
There are a number of institutions where employers add money to avoid cuts in company pensions for employees. “But what worries us most is the pension funds, which no longer have an employer as the sponsor,” says Grund, head of insurance supervision at Bafin Financial Supervision. In the case of cash registers with a large number of institutions, on the other hand, agreement on a capital injection is sometimes difficult.
Financial supervision continues to have 31 of the 135 pension funds under closer supervision that are particularly affected by the slump in interest rates and for whom it is questionable whether providers will inject money. “I assume that the number will increase if the low interest rate phase continues,” explains Grund. The slump in interest rates makes it difficult for the health insurance companies to generate the high commitments of the past.
The Caritas pension fund, which had been in turmoil, had made headlines in the past. The result is a reduction in benefits for retirees and future pensioners. The employer must compensate for the cuts – if they still exist.
Failures threaten
Many pension funds are mutual associations. “Although there is no insolvency protection with these, of course – as with all forms of company pension schemes – there is subsidiary liability on the part of the employer,” says Grund. In the event of an insolvency of the employer, however, the pension fund could face significant losses if the benefits were reduced. The reason would be positive if a solution was found for such cases.
The Federal Ministry of Labor has suggested that in the future the Pension Insurance Association should step in if a pension fund cuts its benefits and the employer cannot make up the difference due to bankruptcy.
From the point of view of Bafin’s financial supervision, life insurers are on average better off. “We assume that German life insurers are robust enough to survive the next few years,” says Grund. “The economic situation is much better than with the pension funds.”
However, the Bafin continues to keep around 20 of the 83 German life insurers under closer scrutiny. “In international comparison, however, German life insurers are surprisingly robust.”
Environment even more difficult
Reason assumes that companies can also bear the burden of building up a capital buffer to which they have been obliged since 2011 due to the slump in interest rates. This ensures the high promises of the old contracts. The capital buffer – called the additional interest reserve in technical jargon – is now building up more slowly than at the beginning.
However, the environment for companies has become even more difficult due to the further tightening of low interest rates. “We assume that around nine billion euros will be added to the additional interest reserve this year,” said Grund. “This is significantly more than the initially expected six billion euros.” dpa (Image: dpa)
© Mannheimer Morgen, Monday, January 6th, 2020
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