Valuation and risk analysis for Dutch pension schemes

This paper examines fair value liabilities and derives the implied indexation rate as the measure of the benefits provided by the conditional indexation mechanism. Further, it assesses the sensitivity of the fair value liabilities to real and nominal curves and discusses immunisation techniques derived from this framework

There have been significant developments in the life and pensions industry over the last few years. In countries such as the UK, Denmark and the Netherlands, the regulatory framework has shifted from book valuation towards fair valuation of both assets and liabilities. Traditionally, asset management solutions for pension schemes were targeting long-term objectives such as full or partial indexation of liabilities and reduction of the contribution rate for the sponsor. Simultaneously, short-term