Union Mutualiste Retraite, France’s specialized mutual pension fund, plans to create an occupational pension fund under the new French fonds de retraite professionnelle supplémentaire (FRPS) system.
UMR, which is solely an annuity provider and operates primarily a points-based system, will transition fully into an FRPS, a vehicle governed by a framework compliant with the IORP II Directive.
This is in contrast to large insurers who build separate FRPS structures for their annuity business.
Virginie Le Mée, chief executive of the €9.7 billion UMR, said the mutual wanted to make the switch to benefit from a more stable calculation base for its solvency ratio.
“We will move to a flat rate calculation and no longer be subject to market fluctuations as may be the case under Solvency II,” she told IPE.
UMR benefits from transitional measures and exemptions under Solvency II, leaving its solvency ratio at a very comfortable 326%, but the FRPS regime is much more stable, which is better suited for a long-term player like UMR, Le Mée said.
Under the FRPS, UMR is required to set aside capital equal to 4% of its liabilities.
According to Le Mée, the switch to the FRPS regime will not lead to any changes in the asset allocation for UMR.
She said that major French insurers that created FRPS have already switched part of their investments to equities, but that the move to Solvency II had not affected UMR’s asset allocation a priori, so moving away from it would not be the case either .
“Our asset allocation has remained fairly stable,” she said, although she pointed out that the mutual exited €300m worth of shares last December to take profits.
UMR has an average of around 20% of its assets invested in equities, around 50% in bonds, 10% in real estate and the rest in alternatives.
The transfer of assets into an FRPS structure has been possible since 2017, a year after the adoption of the law creating the pension fund vehicle. The deadline for transferring existing assets to an FRPS for pension providers is December 31, 2022.
Le Mée acknowledged that UMR was a laggard, saying this was due to the treatment of mutual benefits under Solvency II that led to its relatively high solvency ratio and because the organization wanted to conduct a strategic review before launching a The change considered the legal framework.
The board of UMR approved the move to an FRPS structure in December last year and in March this year the mutual submitted its draft application to the regulator. The annual general meeting is scheduled to vote on the change in the law in the summer.
Other companies that have joined the FRPS structure are AXA, Allianz, Aviva France, Malakoff Humanis and Sacra. Swiss Life is also aiming for an FRPS and, according to current media reports, CNP Assurances intends to transfer commitments of EUR 25 billion to an FRPS.