IORP II Directive (occupational pensions)
A 2016 directive governing institutions for occupational retirement provision, governance, risk management, member information, with lighter capital requirements than Solvency II, which enabled the creation of French FRPS vehicles.
Directive (EU) 2016/2341 on the activities and supervision of institutions for occupational retirement provision, known as IORP II, revises a 2003 framework applicable to bodies managing company pension schemes. Transposed by January 2019 at the latest, it strengthens governance, with key functions comparable to those of Solvency II, requires an own risk assessment, including environmental, social and governance risks, and improves member information through a standardized annual statement. It also facilitates cross-border activity. It does not, however, impose a risk-based capital requirement comparable to insurers' solvency capital requirement, which is its main advantage for long-term pension liabilities. In France, this difference led to the creation in 2017 of supplementary occupational pension funds, to which insurers transferred part of their group pension liabilities, easing their capital requirements while keeping the management. For the observer, it is an example of deliberate regulatory arbitrage: the same economic commitment weighs differently depending on the prudential framework that carries it.
Textbook case: an insurer transfers 10 billion euros of group pension liabilities to a supplementary occupational pension fund it creates. The liabilities and their management stay in the group, but now fall under the IORP II framework, without a Solvency II solvency capital requirement, which frees a large part of the capital tied up.
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