Risk Management: IORP II requirements
The IORP II requirements place significant focus on improving the risk management function in order to ensure that:
- own-risk assessments are carried out triennially, or after any significant change in risk profile
- risk management is integrated into all management processes & decision making
- risk is considered from the perspective of members and beneficiaries, including the risk of benefit reductions or loss of indexation.
A risk management system is required comprising strategies, processes and procedures, with independent actuarial input where appropriate, to identify, measure, monitor, manage and report risks, including:
- Underwriting and reserving
- Asset-liability management
- Investment, in particular derivatives, securitisations and similar commitments
- Liquidity and concentration risk management
- Insurance and other risk-mitigation techniques
- Environmental, social and governance risks relating to investment assets
- Operational risks
The own-risk assessment must describe how it is used in the management and decision-making processes, and must include assessment of:
- preventions of conflicts of interest where the sponsor carries out functions, or where outsourcing in place
- funding needs, including any recovery plan
- operational risks in a qualitative manner
- protection mechanisms (eg guarantees, sponsor covenants, insurance, government/industry protection) in a qualitative manner
- new and emerging risks, including environmental, and regulatory risks related to investments
- the overall effectiveness of the risk management system.
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Read more on the IORP requirements around governance and member communication.