The solvency ratio of Finnish earnings-related pension providers declined by 0.2 percentage points in first quarter of 2023, the Finnish Financial Supervisory Authority has revealed.

It fell from 127 per cent at the end of 2022 to 126.8 per cent at the end of March 2023.

Finnish earnings-related pension providers’ solvency ratio has been declining since the end of 2021, falling by almost 10 percentage points during that period.

At the end of 2021, the solvency ratio stood at 136.3 per cent.

The Financial Supervisory Authority noted that the solvency ratio fell in Q1 2023 as the return on investment (1.6 per cent) was slightly lower than the required rate of return (1.8 per cent).

“In the early months of the year, the return on liquid investments was positive (3 per cent),” it stated.

“In contrast, the return on illiquid investments was close to zero. Downside risks to the valuation of illiquid investments may, if materialised, weaken the sector’s solvency.

“The employee pension sector's capacity to bear risks related to negative value changes of investment assets is still stable and also resilient to significant write-downs of illiquid investments.”

Pension insurance companies’ average solvency ratio was 126.4 per cent, representing a 0.2 percentage point decrease from the end of 2022.

The solvency ratio of company funds and industry-wide funds increased from 141.2 per cent to 141.8 per cent during the first quarter of 2023.

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