Sweden Extends Pension Discount Rate Floor Ahead of Solvency II

Sweden’s financial regulator extended the deadline for removing a floor on the discount rate used by pension funds, giving the industry an extra six months.

The insurance and pension companies will be able to continue applying a floor to its discount rate until the end of 2013, compared with an initial deadline of June, the Stockholm- based regulator said today in a statement. After that time, so- called Solvency II rules will be implemented, it said.

The Financial Supervisory Authority last June first proposed a one-year floor to the rate at which Swedish life insurance companies and occupational pension funds discount their liabilities in solvency calculations. The plan was meant to counteract sales of shares and buying of interest-bearing assets, the authority said then.

In solvency calculations, insurance liabilities are discounted by a market rate and the value of liabilities rise when rates fall. Swedish life insurance companies and occupational pension funds had been under pressure from falling rates at the height of Europe’s debt crisis as investors poured into Sweden’s AAA rated debt market.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net

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