OECD calls for vigilance on ‘search for yield’, lenience on solvency

first_imgInternational regulators must monitor pension funds in their ‘search for yield’ as they try to secure benefit promises by investing in increasingly risky assets, the Organisation for Economic Co-operation and Development (OECD) has warned.The Paris-based think tank published a paper looking at whether pension funds and insurance companies would be able to maintain promises made in higher-interest-rate times, given the current low-yield environment.In a stark warning, it said regulators should be more lenient on forcing solvency requirements in times of market stress while ensuring pension funds were not taking excessive investment risks that could lead to insolvency.It said there was a serious concern for the financial longevity of pension funds should they become embroiled in an “excessive search for yield” to cover promises made when interest rates were higher. In its Business and Finance Outlook 2015 report, the OECD said pension funds, by increasing the risk profiles, could be “seriously compromising their solvency situation” if a financial shock such as a liquidity freeze took place.Its data showed that, while the overall investment in alternatives had increased, this could be down to overall larger portfolios, with the exception of the UK.The OECD’s UK data showed pension funds clearly engaging in the search for yield, with an upward trend in private equity and structured products.Given the prolonged effect of low interest rates on pension funds, the OECD highlighted duration-matching assets, renegotiating promises, increasing contributions and easing regulation as solutions to alleviate concerns.It echoed calls for regulatory requirements to fund solvency shortfalls to be counter-cyclical, meaning additional funding should be made when pension fund liabilities are not being exacerbated by falling rates.The OECD’s call for leniency in solvency, and focus on investment risk, goes against the rhetoric seen from Europe’s government and regulators.Solvency requirements were discussed under the previous European Commission, while work on a risk-focused solvency framework – which may require additional funding in riskier times – is being worked on by the European Insurance and Occupational Pensions Authority (EIOPA).The OECD said: “The outlook is troubling for pension funds, as solvency positions will deteriorate unless they actively adopt risk-management strategies.“However, the lack of good quality, very long-term financial assets in sufficient quantities poses serious problems to these risk-management strategies.”It said pension funds should look to close the duration gap between assets and liabilities, while policymakers should avoid excessive pressure on pension funds to correct solvency in times of weak markets.“The regulatory framework and policymakers have an important role to play in [ensuring pension funds do not take excessive risk] and need to remain vigilant to prevent excessive ‘search for yield’,” it added.However, Charles Cowling, director at UK consultancy JLT, sounded a note of caution on the OECD’s proposals.He said: “If [regulators] responded to concerns from the OECD on the poor level of funding of pension schemes and increased pressure on employers to take less risk and fund their pension schemes better, this could force some of the weaker employers into bankruptcy and put downward pressure on equity prices and make matters worse – as deficits widen as a result.”last_img read more


OEEC 2019: Energy Transition Live on the North Sea in 2019

first_imgThe Offshore Energy Conference program spans six sessions. Today we offer you a first look at the session titled Energy Transition Live on the North Sea in 2019, which will be held on 8 October.Guided by moderator Rene Peters, Business Director Gas Technology, TNO this session will look at what is happening on the North Sea right now.Europe and the activities taking place in the North Sea are leading in the energy transition. You will leave the session with an overview in mind on what is currently going on and can find out the best practices.Head to www.Offshore-Energy.biz to find out more on the conference. Registration will open shortly!last_img read more


Computers top peace, clothing on holiday wish list

first_imgSAN JOSE – Move over, peace and happiness. Computers are what Americans really want nowadays. The machines that feed us infinite and instant information, store our digital memories, give us hours of fun with games, videos or music – and help us do our taxes – outrank peace, happiness and clothes this year as the most wished-for gifts, according to an annual U.S. survey by the consumer electronics industry’s largest trade organization. Last year, the most popular answer to the survey’s open-ended query about respondents’ holiday wishes was clothing, followed by peace and happiness, money and then computers. Such enthusiasm for computers, TVs, as well as other electronics will help drive electronics sales up 7 percent to $48.1 billion in the fourth quarter from $44.8 billion in the year-ago period, according to a forecast by the Consumer Electronics Association. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREGame Center: Chargers at Kansas City Chiefs, Sunday, 10 a.m.By comparison, the overall retail industry is expected to see holiday sales grow 4 percent, according to the National Retail Federation. “We’re looking at a very solid season for consumer electronics, and it’s certainly a bright spot for the economy,” said Joe Bates, CEA’s director of research. For all of 2007, electronics sales are expected to reach $160 billion, up 8 percent from $148 billion last year, according to the CEA forecast. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more