27. May 2020

Pension and death funds

Kenston Services Ltd offers a comprehensive service portfolio for pension and death funds. For example, a total of around 15 pension and death funds supervised by BaFin (the German Federal Financial Supervisory Authority) are being looked after as responsible actuary.

But Kenston Services Ltd is also the right partner for smaller death funds under state supervision, which usually only require an actuarial report every 5 years to review the financial situation and prepare the balance sheet. They are not only provided with actuarial expertise in the form of expert reports, but also with assistance for communication with the insurance supervisory authority. It should be particularly emphasized that our team, due to high specialization and many years of experience, can also complete expert opinions at short notice and even small insurers do not have to fear a waiting period of months.

Therefore we invite you to get to know the actuarial services of Kenston Services Ltd for pension and death funds:

Execution of “benefit case calculations

Pension calculations are also carried out professionally for complex pension arrangements or in special cases. The calculation can either be documented in a short and clear form or in a detailed and fully comprehensible manner in an annex. Often, especially for small pension funds, an independent review of each benefit case is even required by the BaFin.

Certification of the vested entitlement

After leaving the sponsoring undertaking, insured persons receive a certificate of vested entitlement.

Actuarial reserves and transfer values

In individual cases, the actuarial reserves are generally only requested in connection with the capital settlement or the transfer with transfer value in accordance with § 4 of the Company Pensions Act

 

(BetrAVG), but the determination of the transfer value to satisfy the claim for information in accordance with § 4a of the Company Pensions Act is also part of the service portfolio.

pension rights adjustment

The proposals for the compensation value in the event of pension settlements in the course of divorce proceedings generally require the appointment of an actuarial expert due to the indication of a capital value. If there is still a lack of division rules or business plan regulations or the interpretation of existing rules on the basis of a disputed individual case, we will also provide support here.

Investigation of the collateral in the calculation bases

In actuarial reports, it is standard practice to check the calculation bases. If necessary, however, it may also be examined outside the scope of a regular actuarial report how the collateral has developed over a period of time or how the future development is likely to be. This enables the Fund to react at an early stage.

Estimates, inventory forecasts, deterministic and stochastic long-term forecasts

The medium-term development of an insurance portfolio can be predicted relatively well on the basis of second order calculation bases. Such forecasts can be of importance for the securities in the calculation bases (development of the administrative cost budget), among other things, or they can also influence the decisions in the capital investment. Long-term forecasts are also often required for ALM ( Asset-Liability-Management) studies.

Cash flow analyses and sensitivities

Every forecast is based on assumptions, but how much does the forecast result change if the assumptions are varied? Methods used under Solvency II can be used to determine the variability effects and, if applicable, the dependencies of individual assumptions and thus examine the meaningfulness of the forecasts. The level of detail is arbitrary; the final step is the determination of the Solvency Capital Requirement (SCR) from the underwriting risks under Solvency II.

Effects of changes in the accounting principles

Even with only minor changes to the calculation bases – the effect on the actuarial provision can usually only be determined on the basis of simulation calculations on the respective portfolio, because the relative expense for the change depends essentially on the individual portfolio structure (e.g. in the case of increases in collateral in interest rates or in biometrics). Often there are also different approaches, e.g. in the case of changes in cost rates according to the business plan, which have different effects on the provision for future policy benefits or the premiums for future new business.

Transitional models for financing additional reserves

When making an additional reservation, it is not only important to know which safety level a cash register should reach. Often it also plays a role with which flexibility the funds can be accumulated in order not to put the cash register under unnecessary pressure in case of extraordinary events.

Review of the participation in the valuation reserves

Regulated pension funds have usually regulated the participation in the valuation reserves according to § 211 No. 2 of the Insurance Contract Act (VVG) differently with the approval of the supervisory authority. The amount of the valuation reserves eligible for participation can be reviewed in accordance with the procedure proposed by the German Actuarial Association (DAV), although there is certainly scope for interpretation.

Screening processes

Often, complex processes conceal errors or inaccuracies that cannot be recognized at first glance. Processes can be successively examined for risks. Typical processes are, for example, the preparation of BaFin statements (stress test or forecast calculation), processes in connection with pension compensation, certificates according to § 22.5 German Income Tax Act or reports according to § 22a German Income Tax Act, but also the standardization of data delivery to the responsible actuary. For this purpose, the execution of critical processes is reflected on with the persons actually acting on the basis of real processes and examined and classified with an experienced eye.

Quality assurance, 4-eye-control, further development of internal tools

Through independent parallel development of existing or new functionalities, an instrument for quality assurance can be installed in day-to-day business that, if set correctly, guarantees only minimal effort and high process reliability. It is also conceivable that simple actuarial tools, which are frequently required, can be individually created for the fund (e.g. for self-calculations of pension settlements or transfer values or capital settlements or also for automated calculations of the actuarial reserve, during the year or also for forecasts).

Consulting actuary for regulated pension funds

Many typical questions also affect other pension funds in a similar way: Synergies arise when experience already exists for many processes, how other pension funds could solve a challenge. In addition to the directly supervised funds, there are also contacts to a network of more than 20 pension and death funds supervised by BaFin. The intensity of the advice provided varies widely. It is conceivable to provide advice depending on the process (usually initiated by the Executive Board,

e.g. in the event of changes in processes or due to new IT). However, regular appointments can also be made to deal with overriding issues, such as interfaces between individual departments or risk management support, in the same way as the screening process.

Activity as responsible actuary

The cooperation with the responsible actuary is usually for long periods of time and characterized by special trust. In addition to the reliability of the content of the activity, adherence to schedules and flexibility are certainly of particular importance. In our opinion, the most important thing here is proper coordination so that, for example, there are no unnecessary delays in the tight schedule of the annual financial statements. And especially in the dialogue with the supervisory authority, it can be advantageous if solutions for comparable cases from other funds are already available. A total of 14 pension and death funds supervised by BaFin are currently being supervised as responsible actuaries.