Varma’s solvency capital strengthened by EUR 0.9 billion after the end of March as investments recovered from the coronavirus crisis of the spring. Solvency capital grew to EUR 8.8 (11.6 on 1 Jan) billion and was thus 1.7 times the solvency limit (1.8 times on 1 Jan). Varma’s solvency capital, which serves as a risk buffer for investment operations, is still at a strong level. It provides protection against volatility in investment market returns and enables Varma to aim for higher returns by making riskier investments with a better return potential. More information is available in our news release.
Strong solvency upholds confidence in pension provision. Better investment returns mitigate the pressure to increase pension contributions. Varma’s strong solvency benefits our clients through lower insurance contributions.
In good investment years, investment returns are used to increase the solvency capital, while in lean investment years, the solvency capital shrinks. Good solvency enables Varma to aim for higher returns by making higher-risk investments. As a rule of thumb, one percentage point more in investment returns in the long term means a two-percentage-point drop in pension contributions.