Supplementary occupational pension fund (FRPS)
A French insurance company dedicated to supplementary occupational pensions, created by Ordinance No. 2017-484 of April 6, 2017, which takes these liabilities out of Solvency II into a prudential regime modeled on the IORP directive.
The Sapin II law (Law No. 2016-1691 of December 9, 2016), in its Article 114, empowered the government to create, by ordinance, bodies dedicated to supplementary occupational pensions. Ordinance No. 2017-484 of April 6, 2017 did so, and Decree No. 2017-1171 of July 18, 2017 completed it. On the insurance side the body is called an FRPS and sits in Articles L. 381-1 and following of the Insurance Code; mutual societies have their MRPS under the Mutual Code, provident institutions their IRPS under the Social Security Code. An FRPS is an insurance company licensed by the ACPR, but limited to retirement liabilities tied to an occupation: former Article 39, Article 83 and Madelin contracts, retirement savings plans (PER), individual ones included. The appeal is prudential. A pension that runs for forty years is expensive in SCR under Solvency II, above all for interest rate and longevity risk. The FRPS falls under the IORP directive: quantitative requirements close to Solvency I, a margin based on mathematical reserves, and qualitative governance requirements taken from Solvency II, with stress tests monitored by the ACPR. The capital released can be large for a life insurer heavily exposed to group pensions. Aviva France created the first one, Aviva Retraite Professionnelle, now Abeille Retraite Professionnelle, with a portfolio transfer of about 4 billion euros. Generali, CNP Assurances (CNP Retraite, licensed on September 21, 2022) and Crédit Agricole Assurances followed. Conversion goes through a portfolio transfer approved by the ACPR, and policyholders lose neither guarantee nor rate. In return, the supervisor keeps a close eye on a body that holds less capital against longer liabilities.
Textbook case: a life insurer transfers to an FRPS a pension portfolio whose mathematical reserves are 2,000 million euros and which carried, under Solvency II, an assumed SCR of 130 million. Take a margin requirement of 4% of reserves, the order of magnitude of the old Solvency I regime: 0.04 × 2,000 = 80 million. With 160 million of own funds allocated, the coverage ratio goes from 160 / 130 = 123% under Solvency II to 160 / 80 = 200% in the FRPS. At equal coverage, 160 / 130 = 1.2308, the FRPS needs only 1.2308 × 80 = 98.5 million, so 160 − 98.5 = 61.5 million of own funds become available.
FRPS, French occupational pension fund, fonds de retraite professionnelle supplementaire, French IORP, ORPS France, FRPS prudential regime, French pension fund Solvency I, insurer conversion to FRPS
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