Finnish pension schemes increased investment risk in Q1 – FIN-FSA

The Finnish employee pension sector increased its investment risk in the first quarter of 2021, according to the country’s financial regulator, the Finnish Financial Supervisory Authority (FIN-FSA).

Publishing an update in the financial sector’s capital position, FIN-FSA said the employee pension sector's solvency ratio improved on the back of the return on equities and was 131.9 per cent (12/2020: 129.1 per cent).

In addition, the other investment classes also developed positively and the sector’s total return on investment was 5 per cent for the quarter.

FIN-FSA said the portion of equities in the sector's investment assets rose, accounting for nearly half of the total volume of investments. Reflecting the rise in equity risk and exchange rate risk, the solvency position remained unchanged (1.7), despite the increase in solvency capital.

The ratio of the solvency limit, i.e. the solvency capital requirement, and investment assets rose to its highest level since the introduction of the solvency legislation in 2017 (14.1 per cent, 12/2020: 12.8 per cent).

Furthermore, it said the employee pension sector's payroll improved slightly from the previous quarter.

Overall, the Finnish financial sector's capital position remained good in the first quarter of 2021, FIN-FSA said, adding that the economy has been bolstered by the progress in Covid-19 vaccinations and improvements in household and business confidence. However, risks related to the pandemic and economic developments are, nevertheless, still heightened.

“Even though the state of the Finnish financial sector has remained good during the Covid-19 pandemic, the sector must continue to prepare for possible loan losses and changes in financial market pricing. Thanks to its good capital position, the Finnish financial sector can nevertheless support the economic recovery, despite the uncertainties,” FSA director general, Anneli Tuominen, said.

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