Regulatory Alerts2024-01-04
Maximum Interest Rate Regulation for Insurance Undertakings (VU-HZV)
The Austrian Financial Market Authority (FMA) issued this regulation to cap the maximum interest rate used for calculating technical provisions in life insurance at 0.00% for domestic currency contracts, while allowing foreign currency contracts to use up to 60% of the average ten-year government bond yield. Insurers must apply the prudent person principle when selecting rates, ensuring sufficient coverage for policy obligations even under adverse market conditions. Additionally, the regulation mandates the establishment of an additional interest provision whenever expected investment income falls short of guaranteed interest liabilities, with specific calculation and release rules to maintain solvency and continuity.
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