IPF årsrapport 2018 (eng) - Flipbook - Side 11
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9
Risk and solvency
Solvency capital requirement and own funds
There are common solvency regulations in the EU.
The aim of the regulations is to ensure effective
risk management and uniform calculation of
solvency capital requirements and own funds for
EU insurance and pension companies. Provisions
for insurance contracts are calculated on the basis
of a discounting yield curve which is published by
the common EU supervisory authority, EIOPA, and
a so-called risk margin is recognised to cover the
uncertainty in the cash flows included in
calculation of the provisions.
Industriens Pension has decided to calculate the
solvency capital requirement according to the
Solvency II standard model (standard formula) and
to calculate provisions on the basis of the EIOPA
yield curve without volatility adjustments.
Insurance contracts in Industriens Pension do not
contain earnings for equity, and thus provisions do
not contain a profit margin.
The solvency capital requirement is calculated on
the basis of a quantification and a weighting of the
different types of risk according to the regulations
stipulated in the Solvency II standard model
(standard formula). Overall, the different risks are
categorised as insurance risks, market risks,
counterparty risks and operational risks.
The insurance risks category primarily includes the
consequences of members living longer than
anticipated, an increase in the number of
disabilities, and a possible disaster situation with
extraordinary increases in the number of deaths
and disabilities within a short period.
The market risks category includes the
consequences of negative changes in financial
markets primarily resulting from interest-rate
changes, a fall in share prices and currencies as
well as drops in property prices.
The solvency capital requirement amounted to DKK
2.7 bn. at the end of 2018, and accepted own funds
to cover this requirement amounted to DKK 9.3 bn.
This corresponds to excess liquidity of DKK 6.6 bn.
and Industriens Pension is thus particularly well
consolidated.
In 2018, the principles for calculating accepted own
funds changed, as - under certain conditions receivable tax on yields of certain pension-scheme
assets (tax assets) may now be recognised under
own funds. Comparative figures for previous years
have been adjusted accordingly.
For 2017, recognition of the tax asset in accepted
own funds led to an increase in the solvency ratio
from 301% to 378%.
Table 10 Solvency capital requirement and
own funds
DKK mill.
2017
2018
Total solvency capital requirement
Insurance risk, life
444
470
Insurance risk, health *
395
512
3,648
3,851
43
54
-609
-709
Market risk
Counterparty risk
Effect of diversification
Operational risk
96
96
-1,558
-1,566
2,459
2,709
Accepted own funds
9,293
9,312
Solvency ratio
378%
344%
Covered by provisions
Total solvency capital requirement
Own funds
* Sickness/accident and lump sum benefits in the event of disability
and critical illness
In 2018, the solvency capital requirement increased
by DKK 250 mill. to DKK 2,709 mill. This increase
is primarily due to repayment of a large tax asset,
which has subsequently been invested, resulting in
assumption of market risk.