The company must take into account the nature of its liabilities as well as its solvency position.
Cash Flows: Besides the investment yields, money flows as paid contributions and flows out as pension expenditure in the company. The pension expenditure is calculated depending on the number of pensioners and the average funded pensions. The contributions depend on the total salaries of the insured persons.
Solvency Capital: Solvency capital is the amount by which the total assets of the company exceed the sum of its reserves. It functions as a buffer against the variation of the investment results. Because the reserves of a pension insurance company must always be fully covered by its assets, a non-positive solvency capital means a bankruptcy. Therefore, the development of the solvency capital is an important factor in policy evaluations. The legislation prescribes various minimum and target levels for the solvency capital of a pension insurance company. The basic quantity is the solvency border, which depends on the structure of the company's investment portfolio. The lower border of the target zone is twice the amount of the solvency border. The position of the solvency capital relative to these levels is an indicator of the solvency risk of the company.