Tag Archives: Netherlands

AFM grants licence for investment services to Milliman Financial Strategies

The Netherlands Authority for the Financial Markets (AFM) granted Milliman Financial Strategies B.V. (MFS) a licence for investment services at the end of 2020 (Article 2:96 of the Financial Supervision Act). MFS, with an execution platform in Chicago, London, Amsterdam and Sydney, manages financial balance sheet risks of pension funds and insurers worldwide. In 2018, due to the approaching Brexit, it was decided to serve the European clients of MFS from Amsterdam in addition to London. With the licence granted, MFS can continue to manage financial balance sheet risks for Dutch financial institutions, including pension funds.

“The asset management market is changing rapidly and is under pressure from increasing competition and regulation, resulting in lower management fees and higher costs. Since its inception in 1998, Milliman Financial Strategies has invested in state-of-the-art technology to provide its clients with effective, efficient and transparent hedging solutions. As a result, we are well positioned for these changes in the asset management market,” said Marcel Kruse, Director at Milliman.

“For many years, Milliman Financial Strategies has been helping financial institutions in the United States, Canada, Europe, Australia and Japan to manage market risks on their balance sheets. We are delighted to add our Amsterdam office to our global trading platform and offer our tailored hedging solutions to Dutch pension funds,” said Sam Nandi, Principal and Managing Director at Milliman.

“Milliman’s hedging and overlay solutions stand out from existing providers because we combine the innovative and solution-oriented approach of our consultancy practice with a robust in-house developed system architecture and enrich it with our actuarial knowledge and expertise, including that of Dutch pension funds and pension schemes,” said Rajish Sagoenie, Principal and Managing Director at Milliman.

Milliman opens investment consultancy in the Netherlands

Milliman today announced the opening of an investment and risk management consultancy practice in the Netherlands. This practice complements Milliman’s Dutch actuarial and pension consulting practice and answers a market need for integrated actuarial and risk management services. Milliman has hired risk management expert Marcel Kruse, MSC, RBA, to lead the new practice.

“Dutch pension funds face challenging cost and governance pressures and are in need of both actuarial and risk management expertise as key lines of defense in the management of their plans,” says Rajish Sagoenie, Principal and Managing Director of Milliman’s Dutch pension practice. “Marcel is the ideal leader of our Dutch pension, investment and risk consultancy practice. He will help clients fill in the second line of defense within IORPII fully.”

“We believe complying with regulation is just a first step,” says Marcel Kruse. “With this initiative, we will help our clients integrate risk management in the investment policy, monitoring, and reporting—all of which are essential to making your pension fund a strong and future-proof organization.”

For more information about Milliman’s actuarial and risk management services, click here.

New mortality tables create considerations for Dutch pension plans

This year, new mortality tables were published in both Germany and the Netherlands that will have different effects on pension liabilities in those countries. While new mortality rates in Germany will increase the value of pension liabilities there, in the Netherlands, new mortality rates will decrease the value of pension liabilities. In this article, Milliman’s Ernst van Bruggen provides some perspective and discusses several issues relating to the updated Dutch tables.

Longevity risk considerations for Dutch pension funds

To determine required reserves for pension finds in the Netherlands, funds must consider various risk categories and their interdependencies. Reserves should be such that the overall likelihood of underfunding after one year is less than 2.5%. Mortality is one of the risk categories.

In the Netherlands, Milliman consultants distinguish three elements in mortality risk:

1. Process risk – This originates from abnormal adverse variation in insurance results in one year.
2. Trend mortality uncertainty – This covers the uncertainty regarding the longevity trend.
3. Negative stochastic deviation – This covers the risk that estimated mortality rates differ from the actual mortality rates.

The impact of trend mortality uncertainty is relatively large because a good estimate requires a large amount of data. And small changes in the trend can have large effects.

In this article, actuaries Rajish Sagoenie and Gert Maarsen describe in more detail how pension funds in the Netherlands deal with longevity risk and look into current developments, including updates to mortality tables.

Knowing participants’ profiles is becoming increasingly important

The debate about a new pension system in the Netherlands is becoming more and more complicated because of issues including solidarity, labor market flexibility, indexation security and uncertainty about the level of pension income. These subjects are complicated. The question regarding whether pension income from retirement date is high enough in relation to income received in active employment or more relevant to the spending pattern is not often mentioned in this context. The questions about how long pension is to be paid out (lifelong) and how much premium participants are willing to pay for their retirement are rarely discussed.

We suspect that one of the reasons that we find these questions so difficult to answer is because we do not really know about the (ex) participants (workers, retirees and former participants with vested pensions). As a consequence, the pension debate becomes an abstract compensation and benefits discussion focused on a complicated financing component.

Having relevant knowledge about our stakeholders could provide significant benefits. If we know and understand our participants well, then:

• Pensions, even without specific customization, could be fitted to stakeholders more appropriately.
• Choosing the most appropriate financing (in terms of risk, duration and reservation) could be ensured.

Getting knowledge and information about our pension stakeholders can be accomplished in various ways. This may include:

• The pension stakeholders ask the right questions at the right level of knowledge-estimated by using available data (such as salary level and job title)-and in understandable language
• Combining knowledge of our pension stakeholders with external data to gain more insight and to better understand their needs.

A good example is the correlation between education level and life expectancy of participants. The Dutch Central Bureau of Statistics (CBS) regularly publishes that the life expectancy of a Dutch man with a highly qualified education at the academic level is much higher than that of a man who has enjoyed a maximum of elementary school education. Milliman calculated that the remaining life expectancy at the age of 68 for the more highly educated group was more than two years greater than for the other group.

In practice, it appears that data about the training of individual participants is often not available to pension funds. If this information were adequately collected and stored in the near future, then additional analyses could be performed using this data. This contributes to the necessary knowledge and insight into the needs of our pension stakeholders. As a result, not only the expected duration of benefits can be determined, but also, by combining this data with other available data, we could estimate the individual’s income needs. The combination of data and analysis of connections between data can create even greater insight. For example, it makes a big difference whether a participant in a retirement scheme has a physically demanding occupation or a light one, whether he travels regularly or stays at home reading, and whether he maintains a healthy lifestyle or just the opposite.

Collecting knowledge about our participants and analyzing already available knowledge or information (big data) could ensure that we design better pension schemes and that their funding takes place in the most appropriate way.

Let’s start with that today. More knowledge and insight into participant profiles helps both the employer and the performer get better “demonstrable in control” information regarding their pension commitments, provisions, and HRM policies.

Integrated risk management roundtable for Dutch pension funds

Milliman has organized a roundtable discussion to explore integrated risk management (IRM) for Dutch pension funds, for Wednesday, 27 September 2017, in Amsterdam. While the Dutch National Bank (DNB) devotes a lot of attention to IRM and expects pension funds to have a structured approach, we find that many funds have difficulty formalising one.

At this roundtable, Milliman consultants will discuss the following:

• What is IRM and what does it entail?
• What are common IRM strategies and policies for Dutch pension funds?
• How can the pension board perform a thorough risk assessment?
• How can the board ensure proper commitment to IRM?
• How can the board ensure adequate monitoring and evaluation?
• How can the board ensure that the DNB is satisfied with a fund’s IRM?

Seats are limited. If you would like to attend, email us here for more information.