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Solvency Levels, Asset Allocation and Risk Management in Swiss Pension Funds

Applicant Wagner Joël
Number 159428
Funding scheme Project funding (Div. I-III)
Research institution Département de sciences actuarielles Faculté des Hautes Etudes Commerciales Université de Lausanne
Institution of higher education University of Lausanne - LA
Main discipline Science of management
Start/End 01.08.2015 - 31.07.2018
Approved amount 181'419.00
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All Disciplines (2)

Discipline
Science of management
Economics

Keywords (5)

solvency; asset allocation; pension funds; risk management; risk analysis

Lay Summary (French)

Lead
Les changements démographiques ainsi que les dernières turbulences sur les marchés financiers ont créé un environnement plus difficile pour le système de la prévoyance professionnelle. Le ratio du nombre de cotisants par rapport au nombre de retraités en déclin et des rendements historiquement bas allant de pair avec une volatilité accrue sur les marchés posent des défis multiples et multifactoriels aux caisses de pension. A cela se rajoutent l’incertitude face aux réformes politiques, les risques opérationnels et la pression constante pour la mise en place de mesures d’assainissement, ainsi que les changements sociétaux qui tous requièrent des analyses particulières et des interventions de la perspective de la gestion du risque.
Lay summary

Ce projet de recherche aborde une sélection de questions d’actualité de la prévoyance professionnelle. Il a comme objectif de développer les modèles de la littérature académique, de les appliquer aux fonds de pension Suisses et d’aborder les défis et discussions actuelles.

Les deux premiers sous-projets concernent la solvabilité et les placements des fonds de prévoyance. Nous analysons le taux de couverture adéquat d’un point de vue des assurés et étudions l’équité de différents mécanismes pour le calcul des contributions et de la distribution de surplus. Enfin, nous considérons la question classique de l’allocation d’actifs optimale sous des contraintes réglementaires en tenant compte des paramètres techniques de divers fonds de pension.

Les troisième et quatrième parties mettent l’accent sur les différents risques auxquels les caisses de pension sont confrontées. Nous quantifions l’importance de certains risques à travers des analyses de scénarios pour des fonds choisis et comparons l’amplitude des effets. Finalement, nous étudions la perception des incertitudes actuelles et futures à travers un sondage avec des experts de caisses de pension. Nous mettons en relation la gestion du risque et les mesures prises par des caisses de pension avec leurs caractéristiques comme la taille, l’allocation des actifs, la structure des assurés, et les paramètres techniques utilisés.

Etant donné l’importance de la solvabilité et des sujets de la gestion du risque dans les fonds de prévoyance, ce projet est d’un intérêt particulier pour caisses de pension, les autorités de surveillance et les assurés.

Direct link to Lay Summary Last update: 27.03.2015

Responsible applicant and co-applicants

Employees

Name Institute

Publications

Publication
How do the consideration of non-normal return distributions and of higher moments influence the optimal asset allocation in Swiss pension funds?
Müller Philipp, Wagner Joël (2018), How do the consideration of non-normal return distributions and of higher moments influence the optimal asset allocation in Swiss pension funds?, in Zeitschrift für die gesamte Versicherungswissenschaft, 107(5), 547-561.
The Impact of Pension Funding Mechanisms on the Stability and Payoff from Swiss DC Pension Schemes: A Sensitivity Analysis
Müller Philipp, Wagner Joël (2017), The Impact of Pension Funding Mechanisms on the Stability and Payoff from Swiss DC Pension Schemes: A Sensitivity Analysis, in The Geneva Papers on Risk and Insurance - Issues and Practice, 42(3), 423-452.

Collaboration

Group / person Country
Types of collaboration
University of Ulm Germany (Europe)
- in-depth/constructive exchanges on approaches, methods or results
University of St. Gallen Switzerland (Europe)
- in-depth/constructive exchanges on approaches, methods or results

Scientific events

Active participation

Title Type of contribution Title of article or contribution Date Place Persons involved
International Congress of Actuaries 2018 Talk given at a conference Long-Term Care Models and Dependence Probability Tables by Acuity Level: New Empirical Evidence from Switzerland 03.06.2018 Berlin, Germany Wagner Joël;
10th Conference in Actuarial Science & Finance Talk given at a conference Optimal Asset Allocation in Pension Funds Under Consideration of Higher Moments 30.05.2018 Karlovassi, Greece Wagner Joël; Müller Philipp;
Annual Congress of the German Insurance Science Association Talk given at a conference Optimal Asset Allocation in Pension Funds Under Consideration of Higher Moments 22.03.2018 Munich, Germany Wagner Joël; Müller Philipp;
Western Risk & Insurance Association 52nd Annual Meeting Talk given at a conference Optimal Calibration of Annuities in Swiss Pension Funds under Consideration of Financial and Biometric Risks 02.01.2018 Las Vegas, United States of America Müller Philipp;
DSA PhD Summer Seminar 2017 Talk given at a conference Optimal Asset Allocation in Pension Funds Under Consideration of Higher Moments 23.08.2017 Fafleralp, Switzerland Wagner Joël; Müller Philipp;
Annual Congress of the German Insurance Science Association Talk given at a conference The Impact of Pension Funding Mechanisms on the Stability and Payoff from DC Pension Schemes in Switzerland 15.03.2017 Berlin, Germany Müller Philipp;
Western Risk & Insurance Association 51st Annual Meeting Talk given at a conference Optimal Asset Allocation in Pension Funds Under Consideration of Higher Moments 02.01.2017 Santa Barbara, United States of America Müller Philipp;
43rd Seminar of the European Group of Risk and Insurance Economists Talk given at a conference The Impact of Pension Funding Mechanisms on the Stability and Payoff from DC Pension Schemes in Switzerland 19.09.2016 Limassol, Cyprus Müller Philipp;
3rd European Actuarial Journal Conference Talk given at a conference The Impact of Pension Funding Mechanisms on the Stability and the Payoff from DC Pension Schemes in Switzerland 05.09.2016 Lyon, France Müller Philipp; Wagner Joël;
DSA PhD Summer Seminar 2016 Talk given at a conference Optimal Asset Allocation in Pension Funds 24.08.2016 Fafleralp, Switzerland Müller Philipp; Wagner Joël;
Seventh International Conference MAF 2016 Talk given at a conference On the Adequate Funding Ratio in Swiss Occupational Pension Funds from the Insured's Perspective 30.03.2016 Paris, France Müller Philipp;
61e Journées de séminaires actuariels Lyon-Lausanne Talk given at a conference The Impact of pension funding mechanisms on the stability and the payoff from DC pension schemes 08.02.2016 Lausanne, Switzerland Müller Philipp; Wagner Joël;
Western Risk & Insurance Association 50th Annual Meeting Talk given at a conference On the Optimal Funding in Occupational Pension Funds from the Insured's Perspective 03.01.2016 Wailea, United States of America Müller Philipp;
DSA PhD Summer Seminar 2015 Talk given at a conference Adequate funding ratio in pension funds from the insured's perspective 02.09.2015 Fafleralp, Switzerland Müller Philipp; Wagner Joël;


Knowledge transfer events

Active participation

Title Type of contribution Date Place Persons involved
Swiss Pensions Conference 2018 Talk 15.05.2018 Geneva, Switzerland Wagner Joël;


Associated projects

Number Title Start Funding scheme
180350 Development of Personalized Health in Switzerland: Social Sciences Perpectives 01.01.2019 Sinergia
169662 Public-private interactions and intergenerational phenomena in long-term care financing 01.09.2017 Project funding (Div. I-III)

Abstract

The demographic and capital market framework conditions for occupational pension funds have significantly changed in the last decades. A declining ratio of the number of active workers to the number of retirees and historically low returns accompanied with higher volatility pose challenges to pension funds. Furthermore, the uncertainty about future reforms, operational risks and societal changes require particular analyses and action-taking from a risk management perspective.In this research project we want to study a set of selected questions and by that extend the models from the academic literature, apply methods to the Swiss pension funds landscape and address current challenges and discussions. The first two subprojects consider solvency requirements and the asset allocation of pension funds. We analyze what the adequate funding level is from the policyholders viewpoint and assess the fairness of different contribution and surplus distribution mechanisms. In addition, we consider the classical question about the optimal asset allocation under regulatory constraints and take into account the technical parameters from different pension plans offered. The third and fourth subprojects focus on the various risks that pension funds are facing. We quantifiy the impact of selected risks through scenario analyses in representative pension funds and compare the magnitude of their impact. Finally, we study the perception of current and future uncertainties through a survey with pension experts. We shall put into relation the risk management and action-takings of pension funds with the funds' characteristics like, for example, their size and asset allocation, insureds' structure, and technical parameters used.Given the importance of the adequate funding and risk management topics in pension funds, this research project is of high relevance to the funds, the regulatory bodies and the policyholders.
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