Skip to content
University of Oxford
School of Geography and the Environment

 School of Geography and the Environment

Sponsored by

Allianz Global Investors
University of Oxford

News & Events: Events, Conferences and Workshops

Invited Seminar: The Governance and Regulation of Risk Management for Defined Benefit Pension Funds

Outline of Content

This seminar will investigate the driving forces of the regulation of risk management for defined benefit (DB) pension funds comparing the Anglo-Saxon world and continental Europe. It seeks lessons about the key parameters that govern risk management including the regulation of investment and funding behaviour, the characteristics of pension liabilities and their recognition in accounting statements, as well as the risk preference in selecting asset portfolios. Furthermore, insights into the regulation and governance of risk management shall be developed.

The seminar will deal with the following topics:

  • What is the nature of the pension promise?
  • What constitutes prudent pension investment?
  • How should pension liabilities be valued?
  • What makes good pension fund regulation and supervision?
  • How can 'governance' manage conflict over competing claims?
  • Can country-specific experience contribute to solutions?


Worldwide, DB pension funds have been exposed to what is commonly termed the 'perfect pension storm' with simultaneously falling equity and rising bond prices which have reduced plan assets and sent liabilities soaring. The parallel change in accounting standards embracing the fair-value approach shed new transparency on pension funds and disclosed often huge deficits in sponsors' balance sheets.

But pension fund systems have coped in quite different ways with these challenges, epitomised by the Dutch and the UK experience. While Dutch pension funds have re-established their financial stability and continue to be sound pillars of social stability, this pillar has been undermined to crumble in the UK as DB pensions have been closed at an unprecedented speed.

Asset-Liability-Modelling (ALM), a key method in strategic risk management, is nowadays firmly established market practice. But as liabilities have become the benchmark for deriving optimal investment policies, the exact nature of the pension promise and the methodology for recognising it on sponsors' balance sheets needs closer scrutinising. Dutch practitioners hail the flexible system of burden sharing between stakeholders as a key success factor of their pension system. Plan sponsors are, to an extent, shielded from the impact of the volatility of pension fund accounting. UK pension funds struggle under the burden of legally prescribed indexation and FRS 17 (IAS 19).

Pension regulators have stepped up the surveillance of pension funds. Major pension reforms have been enacted in a number of countries. The Dutch regulator, on the one hand, leads the way in terms of the risk-based supervision of pension funds based on strict funding rules. The safety of the pension promise is based on pension funds, which are required to build-up buffers. The 'buffer' depends on the institution's risk and their control measured by fair value. Like banks, pension funds are now able to apply their own internal models. How will this fair-value based regulation impact the management of pension funds? What are the lessons to be learnt for those countries which have (not yet?) switched to a full fair value approach?

The Anglo-Saxon world, on the other hand, follows a very different model of regulation. Here in the UK, the pension promise is typically based on the covenant of the sponsor. Recognising that insolvency of the sponsor is a major risk to beneficiaries, UK pension reform introduced a strict risk-orientated pension insurance fund. Funding rules remain flexible but encourage sponsors to fully fund the pension obligations. Are employers able to bear the full burden of risk?

The seminar builds on our experience over the past two years:

  • In 2006, the OECD and Allianz Global Investors joined forces in a research project on risk management for defined benefit (DB) pension funds. The project assesses the impact of investment-relevant pension regulations and accounting rules on contribution and investment strategies within the context of a specifically designed Asset-Liability-Model (ALM). The impact of regulations in Germany, Japan, the Netherlands, United Kingdom and United States were modelled and quantified in a simplified way. The presentation of the results of this project will be the starting point of the seminar.
  • In May 2006, a seminar on Pension and health care liabilities in the corporate sector took place in Oxford. This 'Liability Summit' focussed on the evolution and transformation of private DB pension and health care systems from useful instruments for managing labour resources to legacy costs threatening the future of theirs sponsors and inquired into possible solutions to the dilemma, with a focus on the Anglo-Saxon experience.


Our 2007 seminar intends to draw on this experience and go further. The seminar will confront the differences between the Anglo-Saxon world and continental Europe, and it will ask whether convergence is, finally, now on the agenda.

Participants in the Seminar

We invite pension funds and their consultants, regulators and academics to convene to discuss and engage in the formulation of solutions. The invited international seminar, which takes place at the colleges Queen's and St Anne's, University of Oxford, on September 20-21st 2007, will bring to Oxford about 50 guests. The seminar will not be open to the public and will be conducted on a confidential basis.

Format of the Seminar

The seminar will be led by Gordon L. Clark (Oxford). The seminar will be organised in six separate sessions with two speakers and two to three discussants each. A background briefing paper on the topics will be provided. Participants are expected to have read the paper and be ready to comment on it. Consistent with past experience in convening these types of high-level consultative seminars, the ground rules for success are simple: confidentiality, open discussion without attribution, a willingness to discuss based upon experience, and a commitment to articulating the lessons learnt thereof. Participants are not expected (but certainly welcomed) to contribute a written paper to the conference, but contribute their knowledge and experience through comments and interventions.

View the Agenda and Presentations.

Organisers of the Seminar:

Gordon L. Clark is the Halford Mackinder Professor of Geography at the University of Oxford and Professorial Fellow of St Peter's College, Oxford. He is also a Senior Research Fellow at Harvard University's Labor and Worklife Program. He is the author of Pensions and Corporate Restructuring in American Industry (Johns Hopkins University Press 1993), Pension Fund Capitalism (Oxford University Press 2000), and European Pensions and Global Finance (Oxford University Press 2003). He co-edited the Oxford Handbook of Economic Geography (Oxford University Press, 2000) and the Oxford Handbook of Pensions and Retirement Income (Oxford University Press, 2006). He is also co-author of The Geography of Finance (Oxford University Press, 2007).

Dorothee Franzen is a D.Phil. student at St Peter's College, University of Oxford and a consultant to the OECD. Her doctoral research focuses on the interaction of regulation and investment in the context of defined benefit pension funds. Prior to joining Oxford University she was Head of Pension Research at Allianz Global Investors. She holds a graduate degree in economics from Ludwig-Maximilians Universität, München.

The seminar is sponsored by Allianz Global Investors and the University of Oxford.

For further information contact Professor Gordon L. Clark, Oxford University Centre for the Environment, South Parks Road, Oxford OX1 3QY, United Kingdom: Tel: +44 (0)1865 285072 or or Dorothee Franzen, Oxford University Centre for the Environment,