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Employer Covenants research project

This call for research closed on 15 June 2012 and the content on this page is for information only

Background

The Institute and Faculty of Actuaries is commissioning a research project on the topic of how employer covenants are best taken into account when assessing the capital supporting Institutions of Occupational Retirement Provision (IORPs).

The impetus for this project is provided by the review of the IORP directive and in particular by the Holistic Balance Sheet (HBS) option. This was described in the consultation document issued on 25 November 2011 by the European Insurance and Occupational Pensions Authority (EIOPA) in its draft advice to the European Commission.

Rationale

The rationale for the project is to further the understanding of the issues surrounding, and the practicalities of expressing, 'reliance on employer covenant' as a single figure in a HBS.

The project should also examine what information relating to the assessment of covenant is already accessible to trustees.  This should include information on how intangible assets are valued in balance sheets such as brand, goodwill etc.

We envisage that a member of the Profession will work closely with the successful applicants to facilitate access to relevant information and contacts and to ensure that the questions addressed are relevant to the review of the IORP directive.

Questions to address in the research

  • What are the desirable qualities of a covenant assessment methodology for the purpose of managing and regulating an IORP?
  • How could the frequency of covenant assessments/monitoring be optimised?
  • What are the key features (including pros and cons) of the different approaches that are currently used and that might be adopted in future? In particular:
    • to what extent do they possess the desirable qualities?
    • what are the implications for standard setters?
    • how can they be adapted tobe proportionate for small scheme and small sponsoring entities?
    • what are the potential implications for compliance costs?
  • How do ratings agencies use the publicly available data in company accounts to assess and rate company debt?
  • What additional information do lenders seek and how do they assess how much to lend?
  • What additional information, over and above that used to assess debt, would be needed to assess the security of a company’s pension promise bearing in mind the typical differences in term between these obligations?
  • Are there intrinsic differences between the employer covenant per se, and the value of the covenant that is available to the pension scheme and if so, can they be identified and measured?
  • How do companies assess their own financial strength? (For example how is enterprise value established in merger and acquisition work?) How do analysts assess the impact of a DB pension scheme/liability on the value of i) the equity and ii) the debt of acompany? Does this offer any insights into how an employer covenant could be valued for the purpose of financing pension schemes?
  • What potential areas of conflict with accounting principles are there in valuing the covenant?
  • What extra issues arise in groups of companies and multinationals (i.e. when companies have option to move funds across jurisdictions)?
  • Are there useful lessons to be learned from the work going on for IFRS4 in insurance accounting?
  • Do other countries have data sources and processes that it would be useful to replicate in the UK for the purpose of covenant assessment?

Contact Details

If you have any questions or wish to discuss any aspect of our funding for member-led research please contact the Research and Knowledge Team:

arc@actuaries.org.uk

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Start date
E.g., 23/09/2020
End date
E.g., 23/09/2020

Events calendar

  • Asia Conference Webinar Series

    Webinars
    7 September 2020 - 25 September 2020

    Spaces available

    There will be a prestigious line-up of international speakers discussing the insurance and financial industry’s innovation and change in Asia.  The conference will take place throughout September via an online platform. The webinars consist of plenary speaking sessions and a series of workshop sessions including Life, GI, Data Science, Sustainability, Risk Management and Investment.

    This will be the perfect opportunity for you to discover,ask questions and be at the forefront of current and developing actuarial/financial topics and trends in Asia.

     

  • Spaces available

    This free 90 minute webinar is designed to support the IFoA CPD Co-ordinators, and others, involved in supporting our members to achieve their CPD requirements. 

    The programme will include an overview of the new CPD Scheme; specifically sharing with you key messages to support you implement and embrace the new CPD Scheme for our members within your organisation and regional community; how to arrange a reflective practice discussion; and an interactive reflective practice discussion learning exercise.  In addition, delegates will gain information about accessing, and making the most of the IFoA event Toolkits which you can make use of to run your own in-house events and events for regional communities. 

  • Spaces available

    16.00-17.00 GMT+8

    Consumer expectations are changing Insurance. The Royal Commission in Australia, Design Obligations in the UK, the insurtech ecosystem, and digital-first consumers demanding personalised solutions will all revolutionise how insurance looks like in the future.

  • Spaces available

    12.00-13.00 GMT+8

    This presenter / panel workshop hybrid will be anchored by two presentations examining the socioeconomic, medical and technological factors that will have a significant impact on mortality and our pricing over the next 20 years and beyond. It will also discuss whether significant mortality improvement will continue in Asia or whether varying experience of low improvements or deterioration. 

  • Spaces available

    12.00-13.00 GMT+8

    This presentation aims to provides an overview of the reformation of current Chinese regulatory solvency regime, how industry coping with the new normal after pandemic time and how the reformation of the regulation could help the insurance industry gets back on its feet as well as coming back to the “protection” core value for the policyholders. The presentation would include:

  • Spaces available

    16.00-17.00 (GMT+8) | 09.00-10.00 (BST)

    The basic data of China’s 2nd Critical Illness Mortality Table covers 2000+ products in Chinese market, including about 340 million insurance policies and 5.1 million claimants. Presenter will give the audience a general understanding including but not limited to the following contents:

  • Autumn Lecture 2020: Professor Elroy Dimson

    Online webinar
    14 October 2020

    Spaces available

    Many individuals and institutions have a long-term focus, and invest funds for the benefit of future generations. Their strategy should reflect their long horizon. University endowments are one of the oldest classes of institutional investor, and I will present the first study of the management of these endowments over the very long term.

  • GIRO Conference 2020 Webinar Series

    Available to watch globally in November.
    02-13 November 2020
    Spaces available

    This year's GIRO has been re-designed as a virtual conference to offer members and non-members the opportunity to get up to date content from leading experts in the general insurance field via online webinars. All sessions will be recorded and made available to purchase and re-watch post-event on the IFoA's GI Online Learning Resource area.

  • Spaces available

    Cash-flow driven investing is a game-changer for DB pension funds navigating their end-game. Suitable for sponsors who want to reduce risks on their balance sheets. And for trustees, it shifts the focus to providing greater certainty of returns, managing funding level volatility and ensuring they have enough income to pay cash-flow requirements.

  • Spaces available

    The talk will provide an understanding of the priorities and relationships between deficit reduction contributions, in the context of wider scheme funding, and different types of value outflow from the employer based on the working party’s recently published report.