Order on the Responsible Actuary in Company Pension Funds

Order on the Responsible Actuary in Company Pension Funds 1)

Pursuant to Section 2, paragraph 7, Section 35, paragraph 5, and Section 117, paragraph 9, of the Act on Company Pension Funds, cf. Act Consolidation Act No. 355 of 2 April 2020, the following is prescribed:

Scope of Application

Section 1. This Order applies to company pension funds covered by Section 2, paragraph 1, of the Act on Company Pension Funds.

Appointment and Dismissal of the Responsible Actuary

Section 2. The appointment and dismissal of the responsible actuary may only be carried out by the board of directors.

Section 3.

1. Within 14 days of the board of directors appointing a responsible actuary, this must be reported to the Danish Financial Supervisory Authority (Finanstilsynet).

2. In the report referred to in paragraph 1, the board of directors must provide a declaration that the responsible actuary meets the requirements of Sections 5-8.

3. The board of directors and the responsible actuary must, no later than one month after the responsible actuary leaves office, each send a statement to the Danish Financial Supervisory Authority regarding the background for the departure.

Requirements for the Responsible Actuary

Section 4. At the time of appointment, the responsible actuary must meet the requirements for education and experience as set out in Sections 5-8.

Educational Requirements for the Responsible Actuary

Section 5. The responsible actuary must have completed one of the following educations:

1. The actuary education from a Danish university (cand.act.).

2. The actuary education from another country, if the education includes a) courses corresponding to the courses in insurance mathematics that are part of the actuary education at the bachelor's level from a Danish university, b) courses corresponding to the mandatory courses in life insurance mathematics that are part of the actuary education at the master's level from a Danish university, and c) courses in Danish insurance law and insurance accounting corresponding to the actuary education at the bachelor's level from a Danish university or equivalent.

3. An education from a Danish university related to cand.act., including the educations cand.scient., cand.stat. and cand.scient.oecon, or a corresponding foreign education, if the education meets the following requirements: a) The education must be supplemented with courses in insurance mathematics as well as courses in Danish insurance law and insurance accounting corresponding to the actuary education at the bachelor's level from a Danish university or a corresponding foreign educational institution. b) The education must be supplemented with courses corresponding to the mandatory courses in life insurance mathematics that are part of the actuary education at the master's level from a Danish university.

Requirements for the Responsible Actuary's Experience

Section 6. The responsible actuary must, after completing the education as cand.act. referred to in Section 5, no. 1, have participated in practical actuary work for

1. life insurance companies or cross-sector pension funds covered by the Act on Financial Business,

2. company pension funds covered by the Act on Company Pension Funds, or

3. Labour Market Supplementary Pension (ATP).

4. The responsible actuary must, after completing the education referred to in Section 5, no. 1, have participated in the practical actuary work in the companies referred to in paragraph 1, nos. 1-3, on a full-time basis for at least five years within the last ten years. At least one of the five years must be in close cooperation with a responsible actuary in one of the companies referred to in paragraph 1, nos. 1-3.

Section 7. The responsible actuary must, after completing one of the educations referred to in Section 5, no. 2 or 3, have participated in practical actuary work for one of the companies referred to in Section 6, paragraph 1, nos. 1-3, on a full-time basis for at least six years within the last ten years. The responsible actuary must, after completing one of the educations referred to in Section 5, nos. 2 and 3, and supplementary courses, have worked closely with a responsible actuary in one of the companies referred to in Section 6, paragraph 1, nos. 1-3, for at least one of the six years.

Section 8. The responsible actuary must have at least an in-depth knowledge of the preparation of notifications of the technical basis etc., bonus systems, actuarial calculations, including calculation of solvency requirements, calculation of provisions, and preparation of the annual report to the Danish Financial Supervisory Authority.

Job Description for the Responsible Actuary

Section 9. The board of directors must prepare a job description for the responsible actuary. The job description must contain an overall description of the tasks to be performed as responsible actuary.

2. In company pension funds where other employees perform tasks for the responsible actuary, the job description must generally indicate the distribution of tasks.

The job description must also contain general guidelines for the responsible actuary's delegation of tasks, including for the responsible actuary's subsequent control of the delegated tasks.

3. In company pension funds with fewer than 100 members, the board of directors may refrain from preparing a job description for the responsible actuary.

The Responsible Actuary's Reporting

Section 10. The responsible actuary must, in connection with the board of directors' adoption of the annual report, prepare a written report to the board of directors, cf. however paragraph 4.

2. The actuarial report referred to in paragraph 1 must be signed by the responsible actuary and presented to and signed by the entire board of directors.

3. A copy of the actuarial report signed in accordance with paragraph 2 must be submitted electronically to the Danish Financial Supervisory Authority no later than ten days after the company pension fund's general meeting has approved the annual report.

4. In company pension funds with fewer than 100 members, the responsible actuary may refrain from preparing a written report to the board of directors.

Section 11. The actuarial report must contain all significant conclusions of importance for the preparation of the accounts from the responsible actuary's statement to the Danish Financial Supervisory Authority regarding the accounts for the year to which the report relates.

2. The actuarial report must contain a list of notifications of the company pension fund's technical basis etc. that have been made during the year. The list must be supplemented with the responsible actuary's possible remarks on the notifications.

3. In the actuarial report, the responsible actuary must state whether the person has received all the information requested.

4. In the actuarial report, the responsible actuary must state whether, in the responsible actuary's opinion, the annual report gives a true and fair view of the company pension fund's actuarial conditions.

5. The board of directors must be informed in the actuarial report of all other significant conclusions in the responsible actuary's statement other than those referred to in paragraph 1.

The Responsible Actuary's Statement

Section 12. The responsible actuary must sign their annual statement to the Danish Financial Supervisory Authority.

2. The signed statement must be submitted electronically to the Danish Financial Supervisory Authority no later than one month after the company pension fund's general meeting has approved the annual report for the year to which the statement relates.

3. The Danish Financial Supervisory Authority may, upon application, grant dispensation from the deadline set in paragraph 2.

Section 13. The responsible actuary must prepare the statement in accordance with the indications in Annex 1. Sections and points in the statement must have the same numbering as in Annex 1.

2. The statement must contain a table of contents with page references to the points in the statement.

3. The responsible actuary may refrain from filling out a section or a point in the statement if the responsible actuary assesses that it is not relevant to fill it out. In such a case, the responsible actuary must state the reason why the point or section is not filled out under the relevant section or point.

4. If the responsible actuary assesses that there are additional matters under the individual sections that should be mentioned, the responsible actuary is obliged to include these, for example under independent headings in section 10 of Annex 1.

Section 14. The responsible actuary's statement must meet the conditions in paragraphs 2-4 if the statement is also to function as an actuarial report, cf. Section 10.

2. Section 1 of the statement must be supplemented with the following points:

3. Point 1.6, which must contain a list of notifications made during the year and remarks thereon, cf. Section 11, paragraph 2.

4. Point 1.7, which must contain information on whether the responsible actuary has received all the information requested, cf. Section 11, paragraph 3.

5. Point 1.8, which must contain separate information that, in the responsible actuary's opinion, the annual report does not give a true and fair view of the company pension fund's actuarial conditions, if the responsible actuary's control implies that this is the case in the responsible actuary's opinion, cf. Section 11, paragraph 4.

6. The statement must be presented to and signed by the entire board of directors, cf. Section 10, paragraph 2.

7. The signed statement must be submitted electronically to the Danish Financial Supervisory Authority no later than ten days after the company pension fund's general meeting has approved the annual report for the year to which the statement relates, cf. Section 10, paragraph 3.

8. The Danish Financial Supervisory Authority may, upon application, grant dispensation from the deadline set in paragraph 4.

Penal Provisions and Entry into Force

Section 15. A fine shall be imposed on anyone who violates Sections 2-8, Section 9, paragraphs 1-2, Section 10, paragraphs 1-2, Section 11, Section 12, paragraphs 1-2, Section 13, and Section 14, paragraphs 1-4.

2. Companies etc. (legal persons) may be subject to criminal liability in accordance with the rules in Chapter 5 of the Penal Code.

Section 16. This Order enters into force on 1 July 2020.

2. Order No. 1014 of 28 October 2009 on the responsible actuary in company pension funds is repealed.

3. Guidance of 15 December 2006 on the content of the responsible actuary's statement is repealed.

Danish Financial Supervisory Authority, 14 May 2020 JESPER BERG / Line Bergmann

Annex 1 Content of the Responsible Actuary's Statement

1. General Information

1.1. The following information must be provided at a minimum:

a. A characterization of the company pension fund. The characterization must include at least information on whether the pension fund is closed to new members, whether it is benefit-defined or contribution-defined, and what type of regulation it has.

b. A description of the company pension fund's total portfolio. The description must provide at least

1. the number of members and pensioners,
2. the contribution size, and
3. the size of paid benefits.

c. Information on the pricing basis used by the company pension fund.

If the company pension fund's portfolio consists of several groups of members and pensioners, the information must be provided for each group of members and pensioners.

1.2. It must be stated whether the audit protocol contains special remarks of an actuarial nature, and if so, these remarks must be commented on. Furthermore, a statement must be made regarding what measures the remarks may have given rise to.

1.3. An overall actuarial analysis of the year's net result in accordance with the annual accounts must be prepared. Based on the analysis, comments must be made on a. development trends and b. movements in equity.

If the company pension fund has a bonus reserve, comments must also be made on movements in the bonus reserve.

1.4. To the extent relevant for the company pension fund, an overall calculation of the margin on each of the basis elements interest, risk, and expenses for the year must be prepared, and comments must be made on the information, including development trends.

1.5. A risk analysis must be prepared for each pricing basis of risk factors regarding death and disability, using the portfolios a. "positive mortality risk" (the company pension fund profits if the member/pensioner lives longer), b. "negative mortality risk" (the company pension fund loses if the member/pensioner lives longer), and c. disability risk.

2. Benefit-Defined Pension Schemes with Guaranteed Regulation of Pension Benefits

2.1. The company pension fund's principles for the guaranteed regulation of members' and pensioners' pension benefits must be described. If the company pension fund's portfolio consists of several groups of members and pensioners, the principles for the guaranteed regulation of members' and pensioners' pension benefits must be described for each group of members and pensioners with guaranteed regulation of pension benefits.

2.2. The size of the year's actual guaranteed regulation of members' and pensioners' pension benefits must be stated. The size must be stated in percentage and in kroner. Furthermore, a statement must be made on a) how the actual regulation corresponds to the regulation rate assumed in the pricing basis and provision basis, b) that the regulation rate assumed in the pricing basis is set prudently, cf. Section 8, paragraph 4, and Section 12, paragraph 4, of the Order on Pension Fund Business and the Technical Basis etc. for Company Pension Funds, c) that the regulation rate assumed in the provision basis is set in accordance with Section 4, paragraphs 3 and 4, of the Order on Valuation of Pension Provisions and Pension Schemes upon Switch for Company Pension Funds.

If the company pension fund's portfolio consists of several groups of members and pensioners, the information and statement above must be provided for each group of members and pensioners with guaranteed regulation of pension benefits.

2.3. If the company pension fund has used surplus to fully or partially reduce the pension contribution or lump-sum deposit, cf. Section 14, paragraph 3, of the Act on Company Pension Funds and Section 16 of the Order on Pension Fund Business and the Technical Basis etc. for Company Pension Funds, a statement must be made that the company pension fund, after the reduction, has a basic capital that meets the requirements of Chapter 9 of the Act, cf. the Act's Section 14, paragraph 3, no. 2. The size of the total reduction of contributions and lump-sum deposits in the year must be stated.

3. Benefit-Defined Pension Schemes with Possibility of Bonus Distribution

3.1. If the company pension fund has a bonus reserve, the members' and pensioners' possibility of receiving a share of the bonus distribution must be described.

If the company pension fund's portfolio consists of several groups of members and pensioners who have different possibilities of receiving a share of the bonus distribution, the possibility of receiving a share of the bonus distribution must be described for each group of members and pensioners.

3.2. The method for the company pension fund's bonus allocation must be described.

If the company pension fund's portfolio consists of several groups of members and pensioners who have different possibilities of receiving a share of the bonus distribution, the method for bonus allocation must be described for each group of members and pensioners.

3.3. The distribution of the year's surplus between a possible bonus reserve, allocated bonus, and equity must be stated.

3.4. A statement must be made that the calculation and distribution of surplus has led to a fair distribution, cf. Section 48, paragraph 2, of the Act on Company Pension Funds.

4. Other Pension Schemes

4.1. If the company pension fund has one or more groups of members and pensioners not covered by section 2 and section 3, a statement must be made on the principles for the pension scheme for each of these groups of members and pensioners.

4.2. For each group of members and pensioners not covered by section 2 and section 3, the information mentioned in points 2.1.-3.4. must be provided in the statement to the extent relevant.

5. Company Pension Fund's Solvency

5.1. An analysis must be prepared of the immediate consequences for the size of the company pension fund's pension provisions, equity, basic capital, and solvency margin if the yellow risk scenario (very negative market development) occurs. If the company pension fund has a bonus reserve, this must also be included in the analysis. The company pension fund's most recent annual accounts figures must be used in the analysis. Based on this, Table A must be filled out.

5.2. It must be stated what significance a 10 percent fall in the mortality intensity in the notified provision basis has for the analysis in point 5.1.

It must also be stated what significance a 10 percent increase in the disability intensity in the notified provision basis has for the analysis in point 5.1.

5.3. The company pension fund's investment profile must be assessed based on the analysis in point 5.1. It must be assessed whether the yellow risk scenario gives rise to changing the company pension fund's investment profile.

If the company pension fund has a bonus reserve, the company pension fund's bonus distribution policy must also be assessed based on the analysis in point 5.1. It must be assessed whether the yellow risk scenario gives rise to changing the company pension fund's bonus distribution policy.

5.4. The company pension fund's interest rate risk on assets and liabilities must be stated, calculated with an interest rate change corresponding to that used in the calculation of the yellow risk scenario. If there is a mismatch between the interest rate risk on assets and liabilities, the company pension fund's considerations in this regard must be stated, including what measures the company pension fund has decided or intends to decide on to ensure better alignment between the interest rate risk on assets and liabilities.

5.5. A brief statement must be made on how the company pension fund manages the alignment between assets and liabilities, and on the company pension fund's risk appetite. The company pension fund's management of the alignment between assets and liabilities and the company pension fund's risk appetite must be assessed.

6. Pension Provisions

6.1. An overview of the size of the accounting item Pension Provisions corresponding to the example in Table B must be prepared. The overview must cover the last 5 years.

If the company pension fund has a bonus reserve, the overview corresponding to the example in Table B must be expanded so that the overview also contains the sizes of the accounting item Bonus Reserve for the last 5 years.

If the company pension fund's portfolio consists of several groups of members and pensioners, cf. point 1.1, last paragraph, the information must be provided for each group of members and pensioners. The overview corresponding to the example in Table B must be expanded in this case.

6.2. The parameters used for interest, mortality, disability, and expenses for the calculation of pension provisions must be analyzed. At a minimum, the analysis must briefly explain the assumptions for the parameters used.

7. Reinsurance

7.1. The company pension fund's reinsurance principles must be described and assessed. If the company pension fund uses reinsurance, the year's result of the reinsurance must be stated and commented on.

8. Specific Directives etc. from the Danish Financial Supervisory Authority

8.1. If the Danish Financial Supervisory Authority has given the company pension fund specific directives or similar regarding follow-up via the responsible actuary's statement, a separate statement must be made on this.

9. The Actuarial Content of the Company Pension Fund's Activities and Material

9.1. A statement must be made on how the responsible actuary has performed their supervisory duty in accordance with the Act on Company Pension Funds Section 35, paragraph 2.

10. Other Matters

10.1. Here are listed matters that cannot immediately be attributed to sections 1-9, but which the responsible actuary assesses that the Danish Financial Supervisory Authority should be aware of. The Danish Financial Supervisory Authority can, for example, be made aware of initiatives that the company pension fund plans to implement in the future, or of matters that it is appropriate for the Danish Financial Supervisory Authority to be aware of.

Table A (Results of Sensitivity Analyses)

DKK Year Pension Provisions Equity Basic Capital Solvency Margin Year's Accounts Yellow Risk Scenario

Table B (Size of Pension Provisions)

DKK Year Year - 1 Year - 2 Year - 3 Year - 4 Pension Provisions

1. The Order contains provisions that implement parts of Directive 2016/2341/EU of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs), OJ EU 2016, No. L 354, p. 37.
2. Contains the pension schemes that have not yet been dealt with in the preceding sections, e.g., benefit-defined pension schemes without guaranteed regulation of pension benefits.
3. See Section 4 of the Order on Company Pension Funds' Reporting and Sensitivity Analyses.
4. If the company pension fund has a bonus reserve, Table A must be expanded with an extra column "Bonus Reserve".
5. If the company pension fund has a bonus reserve, Table B must be expanded with an extra row "Bonus Reserve".