TRANSITIENIEUWS – Rondetafelgesprek formalisering beoordelingsproces buy-in/buy-out CWO’s

On 2 October 2023, a roundtable discussion on buy-in/buy-out collective value transfers (CWOs) took place, involving representatives from nearly twenty insurers and pension funds along with DNB.
The focus was on formalizing the assessment process for buy-in/buy-out CWOs due to an expected increase in buy-in/buy-out CWOs in the coming years. The discussion covered the reasons behind DNB’s intention and the methods to achieve it. Feedback from the participants will be considered in formulating guidance that will be released soon.
A buy-in/buy-out involves the transfer of pension rights and claims of participants to another pension provider. If the receiving provider is an insurer, it is termed a buy-out. Prior to a buy-out, there is typically a reinsuring of these pension rights and claims, referred to as a buy-in. The pension fund finances the buy-in through the (partial) liquidation of its investment portfolio. The buy-in/buy-out CWO ultimately leads to the liquidation of the fund, transferring all pension rights and claims to an insurer.
Two main themes were discussed during the roundtable.
1. Firstly, supervision of buy-in/buy-out CWOs from the perspective of overseeing pension funds, addressing issues such as reporting buy-outs to DNB after reinsuring and the lack of formalized DNB involvement during the buy-in.
2. Secondly, supervision from the perspective of overseeing insurers, covering topics like strategy, policy, governance, pricing, reinsurance of longevity risk, materiality of the CWO, and the transferring pension fund.
Participants had the opportunity to ask questions during the roundtable, expressing understanding for DNB’s effort to formalize oversight. Questions mainly sought clarification on processes and practical aspects of the buy-in/buy-out process. Examples included clarification of timelines, handling uncertainty about the acquiring insurer during buy-in reporting, dealing with buy-in occurring well before buy-out, and the scenario where a fund never proceeds to a buy-out after the buy-in.