Quarterly risk assessment of the occupational pensions sector
The IORP risk dashboard, based on individual occupational pensions regulatory reporting, summarises the main risks and vulnerabilities in the IORPs sector of the European Economic Area (EEA) for defined contributions (DC) and defined benefits (DB) pension schemes.
It includes a set of risk indicators covering risk categories, such as
- market and credit risks,
- liquidity risks,
- reserve & funding risks,
- ESG risks, and
- cyber risks.
February 2024 IORP Risk Dashboard
Key observations:
IORPs’ exposure to market & asset return risks is currently at a high level, making this the most relevant risk category for the sector given the still high volatility in bond markets.
Macro risks are at a medium level: there are positive developments related to a reduction in forecasted inflation, partially offset by a GDP growth outlook that remains weak by historical standards.
Liquidity risks are at a medium level but show an increasing trend compared to the previous quarter, driven by developments in derivative positions. The net asset value of IORP's derivative positions went further into negative territory due to the continued increase of interest rates in Q3-2023.
All other risk categories are currently assessed at a medium level, with increases expected for credit risks as well as digitalisation and cyber risks over the next 12 months.