France’s UMR will become a new pension fund vehicle | New

Union Mutualiste Retraite, the French mutual fund dedicated to pensions, plans to constitute itself as an occupational pension fund under the new French regime of the “additional occupational pension fund” (FRPS).

The UMR, which is exclusively a pension organization and mainly operates a points scheme, will be transformed entirely into an FRPS, a vehicle subject to a framework in accordance with the IRP II directive.

This contrasts with large insurers that set up separate FRPS structures for their retirement business.

Virginie Le Mée, managing director of the 9.7 billion euro UMR, said the mutual wanted to make the transition to benefit from a more stable basis for calculating its solvency ratio.

“We are going to move to a flat-rate calculation and will no longer be subject, as may be the case under Solvency II, to the vagaries of the market,” she told IPE.

UMR benefits from transitional measures and exemptions under Solvency II, so its solvency ratio is very comfortable at 326%, but the FRPS regime is much more stable, which is more appropriate for a long-term player like the UMR, said Le Mée.

Under the FRPS regime, the UMR must constitute a capital equivalent to 4% of its liabilities.

The switch to the FRPS regime will not result in any change in asset allocation for the UMR, according to Le Mée.

She said the major French insurers who created the FRPS have already shifted some of their investments to equities, but the move to Solvency II has not affected UMR’s asset allocation in the first place. , so walking away from it wouldn’t do either.

“Our asset allocation has remained fairly stable,” she said, noting that last December the mutual sold 300 million euros of shares to take profits.

UMR has around 20% on average of its assets allocated to equities, around 50% to bonds, 10% to real estate and the rest to alternatives.

The transfer of assets to an FRPS structure has been possible since 2017, a year after the adoption of the law creating the pension fund vehicle. The deadline for pension providers to transfer existing assets to an FRPS is December 31, 2022.

Acknowledging that UMR came late, Le Mée said it was because of the mutual benefits treatment of Solvency II, leading to its relatively high solvency ratio, and because the organization had wanted to carry out a strategic review. before considering a change in the regulatory framework.

UMR’s board 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 due to vote on the legal change this summer.

Other entities that have adopted the FRPS structure include AXA, Allianz, Aviva France, Malakoff Humanis and Sacra. Swiss Life is also aiming for an FRPS and, according to news media, CNP Assurances plans to transfer 25 billion euros of liabilities to an FRPS.

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Dolores W. Simon