The Austrian Financial Market Authority (FMA) today adopted a package of regulations requiring life assurance undertakings to establish additional provisions for life assurance contracts with guarantees. This measure ensures that obligations arising from life assurance contracts can be fulfilled at any time, even in times of continued low interest rates. Insurance undertakings must start making allowances for the additional interest provision in their balance sheets for the 2013 financial year, and the allocation of the additional interest provision must not be to the detriment of the insured.
The additional interest provisions derive from the following amendments to regulations:
- An amendment to the Maximum Interest Rate Regulation (Höchstzinssatzverordnung) lays down the method for calculating the amount to be held in the additional interest provision.
- An amendment to the Profit-sharing Regulation (GBVVU; Gewinnbeteiligungs-Verordnung) prescribes that the additional interest provision must not be allocated at the expense of the insured but must be fully funded by the insurance undertakings themselves.
- An amendment to the Actuary’s Report Regulation (AktuberVO; Aktuarsberichtsverordnung) obliges actuaries to verify and confirm that the provision has been properly established.
Basically, the required provision depends on the development of interest rates in the capital markets as well as on the average rates insurers guarantee. Consequently, insurance undertakings with a high average guaranteed rate in their portfolios must establish proportionally higher provisions than those with a lower portfolio rate. The FMA estimates that the total amount to be allocated by life assurance undertakings as additional interest provisions will be some € 75 to € 80 million in 2013.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-6006
+43/(0676)/882 49 516