AEIP publishes its statement on ‘The need to support paritarian institutions of social protection in light of the Covid-19 challenges’
The statement gives a concise overview of the challenges faced by paritarian institutions in the current pandemic situation, while highlighting their importance from a social and financial aspect. The member organizations of AEIP play a significant role in ensuring adequate benefits for old age income, healthcare and long-term care services while they work as much-needed automatic stabilizers in times of economic strain. Thanks to their joint decision-making process and management by the social partners, they promote transparency, inclusiveness and democratic legitimacy. They also have a substantial role in maintaining financial stability. They often act counter-cyclically by maintaining their long-term strategic asset allocation in stressed market conditions, meaning they rebalance and buy assets whose prices have diminished abruptly.
The general policy measures for countering the Covid-19 pandemic have put substantial strain on the ability of paritarian institutions to sufficiently cover their obligations. In fact, in an effort to alleviate the pressure from businesses and employees, in many countries the payment of social security contributions has become more flexible, through their deferral to a later date, their decrease or even by their temporary waiver. Even though the funding of IORPs and provident institutions is significantly reduced, they continue paying their beneficiaries’ benefits on a regular basis. A most important aspect is to assure the continuity of every-day activity of paritarian institutions and to maintain a good level of services to the members.
Given the significant support that paritarian institutions provide to European citizens in the current crisis, AEIP calls the authorities and institutions at the EU level to:
– continue displaying significant flexibility in the implementation of supervisory practices and regulations in close consultation with the industry.
– EIOPA should also use the present circumstances in order to reflect on a Stress Test (ST) methodology for IORPs which takes into consideration the different national recovery mechanisms.
– DG FISMA and EIOPA should consider the particular social character of the paritarian funds –including IORPs and provident institutions- and not treat them as pure financial institutions.
To read AEIP’s statement, please see here.