The Dutch Financial Assessment Framework: a step forward in solvency regulation of pension funds and insurance companies

In October 2004, the prudential supervisor of pension funds and insurance companies in the Netherlands

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published a consultation document on a new Financial Assessment Framework (hereinafter referred to as FTK, i.e. the acronym for the Dutch equivalent:

Financieel toetsingskader

). This article affords a comprehensive insight into the FTK.

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First, I shall sketch the background of the FTK project that resulted in the consultation document. Also, I shall throw light on the relation between the Dutch FTK and Solvency II. Then I shall introduce the structure of the framework, as well as addressing the main components of the framework, i.e. the valuation principles for the FTK, the solvency test, and the continuity analysis. When describing the solvency test, I shall provide a numerical example to illustrate the standardised method of the solvency test in the FTK. I shall conclude with some remarks regarding the challenges for the pensions and insurance industry as well as for regulators and supervisors.

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