Denmark: Financial Sector Assessment Program: Technical Note: Pensions with Profit Contracts
IMF Staff Country Reports, March 23, 2007
Source details
- Canonical URL
- Denmark: Financial Sector Assessment Program: Technical Note: Pensions with Profit Contracts
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Bibliographic details
- Published: March 23, 2007
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781451811216.002
Summary
- This technical note examines pensions with profit contracts in Denmark.
- The Danish life insurance and pension sector is sensitive to a range of risks on both the asset and liability side of the balance sheet.
- One of the principal vulnerabilities for the sector arises out of the requirement to achieve a high guaranteed return for the duration of “in-force” policies.
- Although several measures have been implemented to increase provisions and capital, and for hedging interest rate risk through derivatives, the overall risk in the pension sector still needs to be closely monitored.
Key findings and vulnerabilities
- Sector sensitivity:
- Risks present on both asset and liability sides of the balance sheet.
- A principal vulnerability stems from the requirement to achieve a high guaranteed return for the duration of “in-force” policies.
- Measures implemented:
- Measures to increase provisions and capital have been implemented.
- Hedging of interest rate risk through derivatives has been implemented.
- Ongoing concern:
- Despite measures, the overall risk in the pension sector still needs to be closely monitored.
Subject areas and keywords
- Subjects:
- Expenditure, Financial institutions, Insurance, Insurance companies, Labor, National accounts, Pension spending, Pensions, Return on investment
- Keywords:
- CR, Europe, guarantee level, guarantied yield, Insurance, Insurance companies, interest rate exposure, investment return, ISCR, market yield, net interest rate sensitivity, Pension spending, Pensions, return on equity, Return on investment, return option, yield, yield environment