EIOPA accepts ‘limited’ risk of pension funds passing on financial shocks

first_imgThe European Insurance and Occupational Pensions Authority’s (EIOPA) first sector-wide stress test has concluded that pension funds’ ability to transmit financial shocks to other market participants is limited.EIOPA – which stress tested 140 defined benefit (DB) funds and 64 defined contribution (DC) funds in 17 markets across the European Economic Area – identified a number of areas in need of pension fund and regulatory attention. It concluded, for example, that DB funds would need to double sponsor support and benefit cuts to offset the impact of its two main scenarios.These scenarios predict steep deficit increases arising from a “demand shock”, leading to a drop in equity markets, or a broad decline in asset prices coinciding with a commodities supply shock. “This makes them vulnerable to a situation in which prices and interest rates decrease at the same time.“Second, a further decrease in interest rates would also directly lead to an increase in the technical provisions and thereby worsen the solvency position of an IORP even further.”However, EIOPA conceded that the likelihood of either scenario materialising was “small”, and that is designed the scenarios to be severe in a historical context.DC stress testsThe scenarios for DC funds examined the risk of two asset price shocks, two low-return scenarios and an increase in longevity and their impact on a fund member’s replacement rate.EIOPA said the impact on replacement rates was “most severe” where low interest rates were combined with higher inflation, due to the impact of a member’s future purchasing power.The supervisor also questioned the ability of DC funds to hedge, noting that matching the duration of fixed income holdings to a fund’s life cycle would “not always be successful”.It said the asset price shock scenario assumed strong increases in credit spreads of government corporate bonds, which were above the decline in the risk-free rate – reducing the effectiveness of hedging.“Similar conclusions can be drawn for (the few) IORPs that hedge inflation risk through inflation-linked bonds,” it added.“Such strategies are designed to work when real yields move in line with real risk-free rates, but a sudden rise in the credit spreads on inflation-linked bonds will reduce its effectiveness.”Risk of contagionThe supervisor also concluded that the direct links between the pension sector and other financial institutions were limited, reducing the risk of IORPs transmitting financial shocks.“However,” it added, “the extent to which IORPs may act as stabilisers of markets depends on their investment behaviour.”EIOPA warned, for example, that while most of the 224 pension funds participating the stress test were buy-and-hold investors, that mentality did not apply to the sector as a whole.“Those IORPs that represent the majority of pension assets expect to rebalance allocations to assets that have suffered the steepest price falls, most notably listed equities,” it said. “Hence, as sellers of government and corporate bonds and buyers of non-fixed income assets, they might support the stabilisation of those segments that would be hit the hardest in the adverse market scenarios.”EIOPA also pointed out that there could be a secondary impact on the real economy from increasing DB deficits, as sponsors were asked to increase contributions.,WebsitesWe are not responsible for the content of external sitesLink to EIOPA stress test results It found that IORPs were better able to deal with a sudden 20% decrease in mortality, noting that while the impact was not negligible, fallout was “relatively limited” when compared with the impact of its market scenarios.Additionally, it found that low-return scenarios had more of an impact on young DC members’ replacement ratios than longevity increases.DB scenariosLooking in detail at the impact of the market scenarios on DB funds, EIOPA found that its first scenario would depress private equity and hedge fund markets, while impacting unlisted infrastructure projects.“In turn,” EIOPA added, “market-based inflation expectations over the short to medium term would continue to fall, while the expected timing of the return of inflation to central bank targets would remain unchanged.”It said its second scenario would have a greater effect on deficits, citing the “sharp” increase in inflation stemming from higher oil prices and associated import prices following a depreciation of the euro against the US dollar.“Both scenarios would impact IORPs in two ways,” it added, noting the large share of equity and property holdings across the pension investment universe.last_img read more

Update on the latest in sports:

first_img4 international players added to NFL rosters for 2020NEW YORK (AP) — Each of the NFC East teams will carry an international player on its practice squad in the upcoming season.As part of its developmental program, the NFL has assigned Mexico’s Isaac Alarcon to Dallas, Germany’s David Bada to Washington, Australia’s Matt Leo to Philadelphia, and Austria’s Sandro Platzgummer to the New York Giants. The division was chosen as part of a random draw.The clubs will carry these players on their roster through training camp, after which they will be eligible for an international player practice squad exemption, granting the team an extra practice squad member.Of course, any of these players could actually make the team’s roster. Elsewhere around the NFL:— The Cleveland Browns have exercised the fifth-year contract options on star defensive end Myles Garrett and tight end David Njoku. The decision on Garrett was no surprise. He was the No. 1 overall pick in the 2017 draft. He’s developed into one of the NFL’s premiere pass rushers and was on his way to another big season in 2019 before he was suspended for striking Pittsburgh Steelers quarterback Mason Rudolph in the head with a helmet. Njoku missed 10 games last season after breaking his wrist.— The Washington Redskins have exercised the fifth-year option on defensive lineman Jonathan Allen’s rookie contract. The team announced the expected move in the aftermath of the NFL draft. Allen was Washington’s first-round pick in 2017 and has started 36 games. The Alabama product has 139 tackles and 15 sacks so far as a pro. He was voted defensive captain in his third season and has emerged as one of the Redskins’ leaders in his mid-20s.— Patriots fullback James Develin is retiring from the NFL because of complications from the neck injury that caused him to miss the final 14 games of last season. He announced his decision in an Instagram message. The 31-year-old has been a staple of both New England’s offense and special teams since joining the team in 2012. He was selected to his first Pro Bowl in 2017 as a fullback. — The Atlanta Falcons have added more help on offense in reaching agreements with 20 college free agents. The Falcons focused on defense in the NFL draft. Among the college free agents who agreed to terms were three wide receivers, two tight ends, one fullback and five offensive linemen. Jalen McCleskey of Tulane, Chris Rowland of Tennessee State and Juwan Green of Albany are the three wide receivers in the group. The Falcons also reached deals with tight ends Jared Pinkney of Vanderbilt and Caleb Repp of Utah State. — The Jacksonville Jaguars have agreed to terms with 18 undrafted free agents. The list includes running backs James Robinson and Tavien Feaster. Robinson or Feaster should have a decent shot at making the team’s 53-man roster because Jacksonville didn’t address the position in free agency or the NFL draft. Robinson ran for 4,444 yards and 44 touchdowns during four seasons at Illinois State. Feaster played three years at Clemson before transferring to South Carolina. He was the Gamecocks’ leading rusher last year, finishing with 572 yards and five touchdowns on the ground.— The New York Giants have agreed to contract terms with 15 players who were not taken in the NFL draft this weekend. Among the players who reached agreements were two Ohio State receivers, Austin Mack and Binjimen Victor.— The Minnesota Vikings have agreed to terms on contracts with 12 college free agents. That’s after the record haul of 15 draft picks they made over the weekend. Texas A&M wide receiver Quartney Davis was one of the priorities, as one of the top-rated undrafted prospects. The 6-foot-1, 201-pound Davis skipped his final season with Texas A&M to turn pro. He had 616 yards and four touchdowns in 11 games for the Aggies in 2019.NHL NEWSBlackhawks fire team president McDonough in surprising move UNDATED (AP) — The Chicago Blackhawks have fired team president John McDonough, ending a wildly successful run that included three Stanley Cup championships.The surprising move comes with the NHL season on pause because of the coronavirus pandemic. And it raises questions about the direction of one of the league’s marquee franchises. McDonough had been supportive of general manager Stan Bowman despite three straight seasons of lackluster results.Owner Rocky Wirtz says it was a difficult move, but he thinks it’s the “right decision.” The owner’s 43-year-old son Danny Wirtz is replacing McDonough on an interim basis. Danny Wirtz is a vice president with the team.In other NHL news:— Longtime NHL forward Joel Ward has retired. The 39-year-old Ward last played in the NHL in 2018 for the San Jose Sharks. He went to training camp with Montreal the following season but was unable to get another shot. Ward started his career with Minnesota and also played for Nashville and Washington in his 11-year career. — FIFA wants to let soccer teams use five substitutes to cope with expected schedule congestion caused by the coronavirus pandemic. FIFA says the temporary plan could help prevent more injuries due to “potential player overload” as soccer competitions catch up with a backlog. The proposal gives competition organizers the option of letting teams use five substitutes in 90 minutes and a sixth in knockout games that go to extra time. FIFA says the rule could be used by all competitions finishing this year and next and all national team games through 2021.— Formula One chairman Chase Carey says he is “increasingly confident” the season can start in July despite the first 10 races being canceled or postponed because of the coronavirus pandemic. The French Grand Prix decided to call off its race on June 28 rather than postponing it. That means the earliest start date is now the Austrian GP on July 5. F1 plans to start racing in Europe “through July, August and beginning of September, with the first race taking place in Austria.” Carey expects the early races to be without fans but hopes they “will be part of our events as we move further into the schedule.”,Tampa Bay Lightning advance to face Dallas Stars in Stanley Cup finals, beating New York Islanders 2-1 in OT in Game 6 MIAMI (AP) — The NBA has pushed back plans that would allow teams to reopen their practice facilities for at least one week.The NBA had decided over the weekend to have teams open their gyms for voluntary player workouts on Friday, if local and state laws made such a move permissible. But on Monday the league revised that potential opening date until May 8, at the earliest.The NBA says the May 8 date is far from firm, warning teams that it “may push this timing back if developments warrant.” VIRUS OUTBREAK-BASEBALLNew Rangers park among possible MLB ideas for season start UNDATED (AP) — The new Texas Rangers ballpark is among possible venues Major League Baseball could use if it decides to start the season with groups of teams in different areas.Among the different plans looked at by Major League Baseball is to use Texas as a mid-American hub.Having all 30 teams based in Phoenix has been examined. So has having groups of teams in Arizona, Texas and Florida.All of those areas have climate-controlled MLB stadiums, and other nearby ballparks. The Rangers still haven’t played a game in their new stadium with a retractable roof.NFL NEWS Share This StoryFacebookTwitteremailPrintLinkedinRedditLAKERS-CORONAVIRUS LOANLakers return $4.6 million from stimulus loan programLOS ANGELES (AP) — The Los Angeles Lakers have repaid a loan of roughly $4.6 million from a coronavirus relief program after learning the program’s funds had been depleted. April 27, 2020 Associated Press NASCARAll eyes on NASCAR as it races toward restartCHARLOTTE, N.C. (AP) — NASCAR is racing toward a restart that could come as early as mid-May.The stock car series is trying to put together a schedule that allows it to race in states that have started re-opening without spectators. The series is working on safety protocols that other racing leagues will be watching.Teams could be back at work in North Carolina race shops by the end of the week when local stay-at-home orders expire.  — Clemson has canceled all of its in-person, on-campus athletic and academic camps due to the coronavirus pandemic and will remain closed until May 8. The cancellations include two weeks of coach Dabo Swinney’s football camps, which have been popular stops for young people eager to gain instruction and contacts with Clemson coaches in all sports. Swinney and his staff have done well in attracting some of the nation’s top players.— There won’t be any sun or sand for beach volleyball pros amid the coronavirus pandemic. The AVP tour has created a public service announcement to urge its fans to stay home to help fight the spread of the disease. Olympic medalists April Ross and Todd Rogers and a handful of the tour’s other stars recorded videos at home that were assembled for the spot that debuted on Monday.— The title sponsor of New Orleans’ canceled PGA Tour event is donating $1.5 million to the tournament’s primary charitable foundation. The donation matches the amount raised during the 2019 Zurich Classic, which was played in a team format and won by the tandem of Ryan Palmer and Jon Rahm. For more than six decades, the New Orleans-area PGA Tour event’s primary charity has been The Fore!Kids Foundation, which raises money through golf events and distributes funds to area children’s service organizations.— USA Swimming has announced its plans for a return to competition, beginning with a series of regional events in August before the national schedule begins in early November at Richmond, Virginia. The governing body is canceling all national events in July and early August because of the coronavirus pandemic. The regional events will be held in August, with an eye toward limiting the need for travel and promoting a safer environment for athletes, coaches, officials and families.— UEFA is paying $255 million in advance to its national federations and easing requirements on how they spend it during the pandemic. UEFA president Aleksander Ceferin says the money “can be used as our members see fit to rebuild the football community.” Ceferin says “this is a responsible decision to help as much as we can.” SPORTS-VIRUS OUTBREAKRemainder of AHL season “likely” to be canceledUNDATED (AP) — The American Hockey League is “quite likely” to cancel the rest of its season because of the new coronavirus pandemic. That’s according to a person with direct knowledge of league discussions who commented anonymously because the person was not authorized to discuss the plans of the NHL’s top minor league. The AHL responded by saying there’s “nothing imminent” in terms of calling off the remainder of the season. Last week, AHL President and CEO David Andrews said the league was “pivoting” to the 2020-21 season but added nothing was official. The season has been suspended since March 12.In other coronavirus-related sports developments:— Arsenal has reopened part of its training ground for players to run alone as the English Premier League accelerates planning for “Project Restart” with the British government. It comes amid increased scrutiny of Downing Street downplaying the potential for sports to exacerbate the coronavirus outbreak seven weeks ago. It took Arsenal manager Mikel Arteta and Chelsea player Callum Hudson-Odoi testing positive for COVID-19 on March 12 for the league to be suspended. Now the decision to allow sports to restart will be informed by experts who said there was “no rationale” to closing them down in the first place. The Lakers applied for the loan under the Small Business Administration’s Paycheck Protection Program, and they received it in the first round of distribution.The team returned its loan after the fund ran out of money in less than two weeks. So did several wealthier business that had applied for the funds, including Shake Shack and AutoNation.The Lakers qualified for the program because they have only about 300 employees. But the team is thought to be the NBA’s second-most valuable franchise, with Forbes estimating a value of $4.4 billion.VIRUS OUTBREAK-NBA FACILITIESNBA pushes plan to reopen facilities until May 8 at earliest Update on the latest in sports:last_img read more