On Jun. 27, GE GVT issued draft bill under Insurance Supervision Act.
GE GVT issued draft of Sixth Ordinance amending ordinances under the Insurance Supervision Act to change actuarial interest rate, and adjustment for pension funds.
Follows EC Sep. 2021 adopted comprehensive review, Solvency II rules, see #116624.
Follows GE GVT Mar. 2021 issued bill to reduce the maximum rate, see #101640.
Purpose of Amendments
The maximum actuarial interest rate in life insurance and for pension funds is to be increased to 1% because the interest rate level has risen significantly since 2021.
Minimum capital requirement amounts must be adjusted due to EU requirements.
This has led to amendment to the Actuarial Provision Ordinance, the Pension Fund Supervision Ordinance and the Capital Resources Ordinance to provide this solution.
The increase in maximum actuarial interest rate leads to a lower minimum funding of the actuarial provision for new contracts, opening up for products with higher benefits.
The obligation of companies to ensure an appropriately cautious assessment of their obligations and to create sufficiently high actuarial provisions remains unaffected.
Alternatively, maintaining previous maximum actuarial interest rate of 0.25% is possible, but as interest rate level increased, this would be a conservative alternative.
Regulatory Outcomes
The regulatory outcome expected by GE GVT is that consumers will have the prospect of insurance being offered with a better price-performance ratio, going forward.
The new maximum actuarial interest rate of 1% accounts for the positive interest rate trend observed on the capital market since 2022 and projections for various scenarios. If, contrary to expectations, there is a sustained decline in interest rates, life insurers and pension funds must examine their tariffs on whether they are still appropriate.
EU CMSN announcement is already applicable, and Article 2 (Amendment to the Capital Requirements Regulation) enters into force the day after the announcement. Article 2 adjusts the absolute lower limits for the minimum capital requirement.
Effectiveness
Comments on the draft bill may be submitted by Jul. 10, 2024.
The increase in the maximum actuarial interest rate will enter into force on Jan. 1, 2025, so that insurance companies and pension funds will have time to prepare.
Jul. 2024 Legislation Published
On Jul. 24, 2024, GE GVT published the Sixth Ordinance amending ordinances under the Insurance Supervision Act, dealing with actuarial interest rates and new EC rules.
The regulation provides for an increase in the maximum actuarial interest rate in life insurance arrangements, as well as the corresponding adjustment for pension funds.
The regulation also updates the absolute lower limits for minimum capital requirements of insurance companies, which has been based upon a notice that was issued from EC.
Only these changes are to be made within the framework of the original legislation.
Ordinance will enter into force on Jan. 1, 2025, subject to sentence 2 of the law, but Article 2, on Capital Requirements, enters in force day after publication, Jul. 25, 2024.
