ERM for Pension Funds [26]

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Bullet points include: If present then these add a further overlay to earlier security mechanisms. Can in principle be modelled by a similar approach. Except that the 'default' process is now a two stage process. Sponsor defaults: benefits potentially depleted on transfer to protection arrangement. At a later time PPS defaults: benefits potentially further depleted. Complications. Premium transfers through time from scheme / sponsor to PPS may deplete future scheme/sponsor resources. In effect 'insurance' against sponsor default - but in what circumstances might the PPS itself default? Moral hazard

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