Belgian Employee Benefits Valuation

An approach based on financial structuring techniques

  • Title : Assessing the economic value of the Belgian Employee Benefits insurances under the recent reform for private complementary pensions (under insurance form)
  • Authors : Wim Konings, Professor Pierre Devolder and François Ducuroir
  • Date : 03 December 2015
  • Reference : Reacfin White Paper 2015
  • Key words : Complementary Pensions - Valuation - Life

In this article we use structuring techniques typically used by investment banks to perform a high-level impact assessment on the minimum value of the recently negotiated new arrangements regarding guaranteed rates for Employee Benefits contracts in Belgium. We exclusively focus on contracts of the type “Branch 21” (i.e. Belgian Life policies with minimum rates guaranteed by the insurers themselves and profit sharing features). To estimate the value of the new feature, we therefor assume a hypothetical policy where such minimum guaranteed rate is the only remuneration perceived by the policy holder. We aim at didactically explaining the values of the different building blocks of the product by not only providing a step-by-step decomposition approach but also relating our findings with the current and historically observed market conditions. Wim Konings, Professor Pierre Devolder and François Ducuroir