Occupational benefit schemes with Helvetia Full
Insurance. Security for retirement assets and pensions.
Employees and employers are deeply interested
in the security of their current pensions and pension fund assets. Many factors affect the stability of occupational benefit schemes: political
and economic conditions, financial markets and
changes in life expectancy, to name just the most
significant. While these factors affect all pension
solutions, some models are more secure than
others. This is partly because contractual guarantees can vary, and partly because the law treats
employee benefit institutions and insurance companies differently.
The security of full insurance
Employee benefit institutions with full insurance provide
the greatest security for pension assets. They differ from
fully or partially autonomous employee benefit
institutions in the following key ways:
◾ The investment risks are insured
An insurance contract covers not only the risks of
death and disability, but also the investment and longevity risks. In other words, the insurance guarantees
the value of the pension assets, the legally required
minimum interest rate and the lifelong payment of
current old-age and survivors’ pensions – regardless
of financial market performance.
◾ There can never be a cover shortage,
which eliminates the need for recapitalisation
The funding ratio for employee benefit institutions
with full insurance is always at least 100%; the guarantees provided by the insurance contract make cover
shortages impossible. Employers, employees and
pensioners never have to pay extra to recapitalise the
pension fund and/or worry about benefit cuts due to a
cover shortage.
Your Swiss Insurer.
1/3 | Security occupational benefit scheme
The security of Swiss life insurance carriers
Only life insurance companies can provide the security
associated with full insurance in Switzerland. A dense
web of legal protections and strict compliance monitoring by the Swiss Financial Market Supervisory Authority
(FINMA) ensure that all guarantees and insurance entitlements can be satisfied at all times.
Key security mechanisms at a glance:
◾ Full cover at all times
The insurance company’s tied assets must always
completely cover its guaranteed benefits, plus a safety
margin; cover shortages, even temporary ones, are
not allowed. The insurance company must also have
enough equity capital to meet its obligations (solvency).
◾ Strict investment rules
Tied assets can only be invested in conformity with very
strict rules on quality, risk diversification, permitted asset classes, risk management and asset management.
◾ Monitoring by supervisory authorities
The Swiss Financial Market Supervisory Authority (FINMA) requires a comprehensive report at least once per
year. This allows FINMA to identify an i­mminent cover
shortage early on and take prompt action to protect the
insured persons’ interests.
◾ Precedence in bankruptcy
If an insurance company declares bankruptcy, the tied
assets are liquidated. The proceeds are first used to
meet obligations under insurance contracts. The insured persons, in other words, take precedence over
other creditors.
2/3 | Security occupational benefit scheme
Terms from the world of pension funds
◾ Fully/partially autonomous employee
benefit institutions
A fully autonomous employee benefit institution bears
all the risks itself. A partially autonomous employee
benefit institution bears the investment risk itself and
transfers some or all of the death, disability and longevity risks to an insurance company.
◾ Funding ratio
The funding ratio is the ratio between the assets that are
actually held by the employee benefit institution (assets
at fair value) and the required pension capital (old-age
savings for assets, actuarial reserve for pensions, etc.).
A 100% funding ratio means that there are just enough
assets to finance all current and future benefits. Fully
and partially autonomous employee benefit institutions
aim to achieve a funding ratio of around 120% in order to compensate for possible fluctuations in the value
of their investments.
Group foundations (employee benefit institutions) with
full insurance contracts do not use funding ratios since
100% of their obligations are guaranteed at all times.
In this model, the provisions and reserves needed to
cover the risks are set aside by the insurance company,
not by the employee benefit institution.
◾ Cover shortage
A cover shortage means that the funding ratio of a fully
or partially autonomous employee benefit institution is
less than 100%. If the employee benefit institution has
to be liquidated at this time, it will no longer be possible to satisfy all of the institution’s obligations toward
the insured persons. For this reason, employee benefit
institutions with cover shortages have to recapitalise in
order to raise their funding ratio back up to at least
100% within a reasonable time.
12-8010 03.17
Terms from the world of insurance companies
◾ Tied assets
Tied assets are separately managed asset pools that
are held by a Swiss insurance company. Tied assets
must always completely cover the insured person’s entitlements (actuarial reserves) plus the safety margin. If
this is no longer the case, the insurance company must
immediately fill this gap with equity.
Occupational retirement benefits are covered by a dedicated pool of tied assets.
Assets
Tied assets
Liabilities
Actuarial reserves
incl. safety loading
Long-term liabilities
Freely available assets
Equity capital
◾ Solvency
In the insurance industry, solvency describes the capitalisation of an insurance company with equity, i.e.
freely available, unencumbered assets. Equity ensures
that the company can satisfy policyholder entitlements
even if business is poor (e.g. if stock prices fall or a
large number of claims are filed).
Solvency, in other words, is an indicator of the security
of an insurance company.
The amount of equity is defined by law. This requirement must be met in accordance with the Swiss Solvency Test.
Full insurance at Helvetia
Helvetia manages two group foundations with full
insurance: the Helvetia Group Foundation for
basic occupational benefits insurance and the
Helvetia Prisma Group Foundation for separate occupational benefits insurance for management employees.
For more information on Helvetia Full Insurance, visit:
www.helvetia.ch/pension-solutions-lob
The most important website for you:
www.helvetia.ch/employers
Helvetia Insurance
St. Alban-Anlage 26, 4002 Basel
P 058 280 1000 (24 h), F 058 280 1001
www.helvetia.ch
Your Swiss Insurer.
3/3 | Security occupational benefit scheme