Pensions and Retirement Training Course on Scenario Analysis for Solvency

Module 1: Introduction to Scenario Analysis and Solvency
Definition and purpose of scenario analysis in pensions
Importance of solvency assessment for pension sustainability
Overview of regulatory and actuarial standards
Case study: Solvency failures and lessons learned
Group discussion: Key challenges in solvency management

Module 2: Understanding Pension Plan Funding and Solvency
Key metrics: funding ratio, surplus/deficit, and solvency ratio
Relationship between assets, liabilities, and solvency
Role of contributions, investment returns, and plan design in solvency
Exercise: Calculating baseline solvency measures for a sample pension plan
Discussion: Differences in solvency approaches for DB vs DC plans

Module 3: Identifying Risks Impacting Solvency
Market risk, interest rate risk, inflation risk, and longevity risk
Operational and demographic risks
Correlation of risks and systemic impacts on pension funds
Workshop: Risk mapping and prioritization for pension plans
Case study: Real-world examples of risk affecting solvency

Module 4: Deterministic Scenario Analysis
Principles and methodology of deterministic scenario testing
Constructing “what-if” scenarios for key assumptions
Evaluating the impact of specific changes on funding ratios
Practical exercise: Deterministic scenario analysis for interest rate and inflation changes
Discussion: Benefits and limitations of deterministic approaches

Module 5: Stochastic Scenario Analysis
Introduction to probabilistic modeling and Monte Carlo simulations
Modeling uncertainty in investment returns, liabilities, and contributions
Forecasting solvency under multiple random scenarios
Practical exercise: Running stochastic simulations for pension fund solvency
Workshop: Interpreting probability distributions and risk measures

Module 6: Sensitivity Analysis in Solvency Assessment
Definition and purpose of sensitivity testing
Key assumptions affecting solvency (discount rates, mortality, salary growth)
Evaluating the range of possible outcomes
Exercise: Performing sensitivity analysis on a sample pension fund
Case study: Using sensitivity analysis for solvency planning

Module 7: Mitigation and Risk Management Strategies
Adjusting funding strategies to maintain solvency
Asset-liability matching and portfolio diversification
Hedging, reinsurance, and risk transfer solutions
Contingency planning for adverse scenarios
Practical exercise: Designing a risk mitigation plan based on scenario results
Discussion: Best practices in solvency risk management

Module 8: Regulatory and Reporting Considerations
Compliance with solvency and funding requirements under IAS 19, IFRS, and local regulations
Preparing reports for trustees, regulators, and auditors
Disclosure of scenario analysis assumptions, methods, and outcomes
Exercise: Drafting regulatory-compliant scenario analysis reports
Case study: Reporting best practices for solvency assessments

Module 9: Communication and Stakeholder Engagement
Presenting complex scenario results to non-technical stakeholders
Using visual tools, charts, and tables for clarity
Preparing executive summaries and actionable recommendations
Group exercise: Presenting scenario analysis outcomes to a board of trustees
Discussion: Effective communication for decision-making under uncertainty

Module 10: Case Studies and Practical Applications
Review of real-world pension fund solvency assessments
Group simulation: Full scenario analysis, risk assessment, and solvency evaluation for a hypothetical fund
Lessons learned and practical recommendations for sustainable pension management
Developing actionable plans for risk mitigation and solvency assurance
Final discussion, review, and certification