Ordinance No. 53 of 23.12.2016 on Requirements for Accounting, Asset and Liability Valuation, and Technical Reserves of Insurers, Reinsurers, and the Guarantee Fund

ORDINANCE No. 53 of 23.12.2016 on the requirements for accounting, the valuation of assets and liabilities, and the formation of technical reserves of insurers, reinsurers, and the Guarantee Fund Pub. - State Gazette, No. 6 of 19.01.2017, effective from 19.01.2017, applied by insurers and reinsurers from 01.01.2017; corr. No. 31 of 18.04.2017; am. and sup., No. 95 of 28.11.2017, effective from 28.11.2017; sup., No. 101 of 07.12.2018; am. and sup., No. 2 of 04.01.2019; am. and sup., No. 88 of 04.11.2022; am. and sup., No. 101 of 20.12.2022, effective from 01.01.2023; sup., No. 90 of 25.10.2024; am. and sup., No. 20 of 11.03.2025, effective from the date of introduction of the euro in the Republic of Bulgaria Adopted by Decision No. 163-N of 23.12.2016 of the CFS

PART ONE
GENERAL PROVISIONS
Chapter One
GENERAL PROVISIONS
Subject and Objectives of the Ordinance
Art. 1. (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) (1) (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) This Ordinance determines:

1. the requirements for:
   a) the financial statements, reports, and annexes of insurers and reinsurers and their submission to the Commission for Financial Supervision, hereinafter referred to as "the Commission"; b) the consolidated financial statements of insurers and reinsurers that are participating undertakings in other insurers or reinsurers, insurance holding companies, and financial holding companies with mixed activity and their submission to the Commission;
2. the additional requirements for the valuation of assets and liabilities in connection with the supervision of solvency;
3. the procedure for the valuation of obligations under insurance and reinsurance contracts for the purposes of mandatory accounting and for the purposes of solvency supervision, the principles applied for calculating the size of technical reserves and obligations under insurance and reinsurance contracts, as well as the maximum size of the technical interest rate for insurance under section I of Annex No. 1 to the Insurance Code.
   (2) This Ordinance also determines:
4. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023);
5. the additional requirements regarding the accounting of the Guarantee Fund;
6. other requirements for accounting.
   (3) (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).

Financial Statements, Reports, and Annexes
Art. 2. (Am. and sup. - SG, No. 101 of 2022, effective from 01.01.2023.) (1) (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) The annual financial statement under Art. 126, para. 1, item 1 of the Insurance Code is the annual financial statement for the purposes of mandatory accounting according to the Accounting Act. (2) (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) The annual report under Art. 126, para. 1, item 2 of the Insurance Code is the annual actuarial report under Art. 100, para. 2, item 2 of the same Code. Annual reports within the meaning of Art. 126, para. 1, item 2 of the Insurance Code also include the solvency and financial condition report under the same Code. (3) (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) Together with the annual reports under Art. 126, para. 1, item 2 of the Insurance Code and within the deadline for their submission, the insurer, respectively the reinsurer, submits to the Commission the Report on Actual Findings from the Verification and Certification of the Reports under Art. 304, paragraph 1, letter "g" of Delegated Regulation (EU) 2015/35 of the Commission of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ, L 12/1 of 17.01.2015). (4) (New - SG, No. 101 of 2022, effective from 01.01.2023.) Insurers and reinsurers submit a regular supervisory report at least once every three years in accordance with Art. 304, paragraph 1, letter "b" of Regulation (EU) 2015/35. In case of significant changes in the risk profile, insurers and reinsurers submit an annual regular supervisory report, and in the absence of such changes, they notify the Commission in writing of this fact. (5) (New - SG, No. 101 of 2022, effective from 01.01.2023.) All insurers and reinsurers, as well as the Guarantee Fund, submit periodic reports, statements, and annexes to the Commission for the purposes of financial supervision. (6) (New - SG, No. 101 of 2022, effective from 20.12.2022.) The general requirements for financial statements, as well as the structure, format, content, and periodicity of the submission of periodic reports, statements, and annexes under para. 5 are determined by an order of the Deputy Chairman, heading the "Insurance Supervision" department.

Annual Reports, Statements, and Annexes
Art. 3. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Quarterly Reports and Statements
Art. 4. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Monthly Statements
Art. 5. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Reports, Statements, and Annexes of Reinsurers Art. 6. (Am. - SG, No. 95 of 2017, effective from 28.11.2017; repealed, No. 101 of 2022, effective from 01.01.2023).
Separation of Mandatory Accounting and Solvency Accounting Art. 7. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Adequacy of Technical Reserves
Art. 8. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Approval of Other Technical Reserves for the Purposes of Mandatory Accounting Art. 9. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Valuation of Obligations under Insurance or Reinsurance Contracts for the Purposes of Mandatory Accounting Art. 10. (Am. and sup. - SG, No. 101 of 2022, effective from 01.01.2023.) (1) (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) For the purposes of mandatory accounting, the insurer, respectively the reinsurer, evaluates obligations for unearned premiums and obligations for incurred claims in accordance with the principles and rules determined by International Financial Reporting Standards (IFRS). (2) (Repealed - SG, No. 101 of 2022, effective from 01.01.2023). (3) (Repealed - SG, No. 101 of 2022, effective from 01.01.2023). (4) (Repealed - SG, No. 101 of 2022, effective from 01.01.2023). (5) (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) For the purposes of solvency supervision, insurers with the right of access to the single market, respectively reinsurers, form technical reserves in accordance with the requirements of Part Two, Title Three of the Insurance Code and in accordance with Regulation 2015/35. (6) (New - SG, No. 101 of 2022, effective from 01.01.2023.) For the purposes of solvency supervision, insurers without the right of access to the single market form the unearned premium reserve under Art. 119, para. 1, item 3 of the Insurance Code and the outstanding claims reserve under Art. 119, para. 1, item 2 of the same Code in accordance with the requirements of Part Two, Title Three of the same Code and in accordance with Regulation (EU) 2015/35. The unearned premium reserve is determined in accordance with the guidelines for the premium reserve in Annex II to Regulation (EU) 2015/2450. The outstanding claims reserve is determined in accordance with the guidelines for the claims reserve in Annex II to Regulation (EU) 2015/2450. In determining the reserves under sentences one, two, and three, the best estimate is determined according to the rules of Art. 154 of the Insurance Code and Regulation (EU) 2015/35, and no risk margin is calculated.

Calculation of Technical Reserves for the Purposes of Mandatory Accounting Art. 11. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Application of Guidelines of the European Insurance and Occupational Pensions Authority Art. 12. (Am. and sup. - SG, No. 88 of 2022; sup., No. 101 of 2022, effective from 01.01.2023.) (1) (Sup. - SG, No. 88 of 2022.) In preparing the elements of regular supervisory reporting under Art. 304 and 372 of Regulation (EU) 2015/35, insurers with the right of access to the single market of the European Union, reinsurers, insurance holding companies, and financial holding companies with mixed activity comply with the following guidelines adopted by the European Insurance and Occupational Pensions Authority:

1. (Am. - SG, No. 88 of 2022.) Guidelines on the recognition and valuation of assets and liabilities other than technical reserves (EIOPA-BoS-15/113 BG);
2. (Am. - SG, No. 88 of 2022.) Guidelines on reporting and public disclosure (EIOPA-BoS-15/109 BG).
   (2) (Sup. - SG, No. 88 of 2022.) In forming technical reserves for the purposes of solvency supervision and in applying long-term guarantee measures, insurers with the right of access to the single market and reinsurers comply with the following guidelines adopted by the European Insurance and Occupational Pensions Authority:
3. (Am. and sup. - SG, No. 88 of 2022.) Guidelines on the definition of a contract (EIOPA-BoS-14/165 BG) and Amended Guidelines on the definition of a contract (EIOPA-BoS-22-394);
4. (Am. and sup. - SG, No. 88 of 2022.) Guidelines on the valuation of technical reserves (EIOPA-BoS-14/166 BG) and Amended Guidelines on the valuation of technical reserves (EIOPA-BoS-22-393);
5. (Am. - SG, No. 88 of 2022.) Guidelines on the application of long-term guarantee measures (EIOPA-BoS-15/111 BG).
   (3) (New - SG, No. 101 of 2022, effective from 01.01.2023.) In preparing reports and statements for supervisory purposes, including regarding the valuation of assets and liabilities, insurers without the right of access to the single market of the European Union comply with the guidelines under para. 1, item 1 and para. 2, items 1 and 2. (4) (New - SG, No. 101 of 2022, effective from 01.01.2023.) The Commission for Financial Supervision issues guidelines on the application of paras. 1 - 3. Application of Guidelines of the European Securities and Markets Authority Art. 12a. (New - SG, No. 90 of 2024.) (1) In accounting for data under contracts for over-the-counter derivatives under Art. 9 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ, L 201/1 of 27 July 2012), insurers and reinsurers comply with the requirements of the Guidelines on reporting under EMIR (ESMA74-362-2281) and the requirements of guidelines 33 and 34 of the Guidelines on the transfer of data between trade repositories under the European Market Infrastructure Regulation and the SFTR Regulation (ESMA74-362-2351), adopted by the European Securities and Markets Authority, for which the Commission has taken a decision on their application in accordance with Art. 13, para. 1, item 26 of the Law on the Commission for Financial Supervision. (2) In reporting under contracts for securities financing transactions under Art. 4, paragraph 1 of Regulation (EU) No 2015/2365 of the European Parliament and of the Council of 25 November 2015 on the transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ, L 337/1 of 23 December 2015), insurers and reinsurers comply with the requirements of guidelines 33 and 34 of the Guidelines on the transfer of data between trade repositories under the European Market Infrastructure Regulation and the SFTR Regulation (ESMA74-362-2351), adopted by the European Securities and Markets Authority, for which the Commission has taken a decision on their application in accordance with Art. 13, para. 1, item 26 of the Law on the Commission for Financial Supervision.

Format of the Electronic Document and Requirements for Signing with an Electronic Signature Art. 13. (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) (1) Insurers, reinsurers, insurance holding companies, and financial holding companies with mixed activity (the obligated persons) submit the statements and reports, reports, and annexes under Art. 126, para. 1 of the Insurance Code, including the elements of regular supervisory reporting under Art. 304 and 372 of Regulation (EU) 2015/35, only in the format of an electronic document, signed with a qualified electronic signature, through the portal on the website of the Commission for Financial Supervision on the internet. (2) The obligated persons submit the statements and reports, reports, and annexes under Art. 126, para. 1 of the Insurance Code as follows:

1. (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) the annual financial statement under Art. 126, para. 1, item 1 of the Insurance Code is submitted in an electronic format suitable for processing, containing a certified annual financial statement and audit report, signed with a qualified electronic signature;
2. the annual actuarial report under Art. 100, para. 2, item 2 of the Insurance Code is submitted in the format under item 1, signed with a qualified electronic signature;
3. the annual and quarterly reports, which constitute templates for quantitative reporting within the meaning of Regulation No 2015/2450, are submitted in XBRL format, signed with a qualified electronic signature;
4. (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) other elements of regular supervisory reporting under Art. 304 and 372 of Regulation (EU) No 2015/35 are submitted in the format under item 1, signed with a qualified electronic signature;
5. the annual, quarterly, and monthly reports for the purposes of mandatory accounting under this Ordinance are submitted in XLS format, signed with a qualified electronic signature.
   (3) The address of the portal is communicated to the obligated persons by the Deputy Chairman.
   (4) The information under para. 1 is submitted only by a natural person (the person submitting the information), who is authorized to manage and represent the obligated person. When the obligated person is an insurer or reinsurer, the person submitting the information presents a power of attorney from at least one other representative of the insurer or reinsurer, confirming that they are authorized to submit the information. Sentence two also applies when the insurance holding company, respectively the financial holding company with mixed activity, is always represented by two or more persons together. In the cases under sentences two and three, the representatives may issue powers of attorney regarding each of them to sign and submit the information under para. 1. (5) Any person submitting information under para. 1 must possess a valid universal electronic signature certificate. The certificate must be issued by an issuer in Bulgaria, licensed by the Commission for Regulation of Communications, and the electronic signature must be professional and contain the BULSTAT code of the company. For each person, the public key of the certificate in base-64 format must be submitted. In case the exported certificate is submitted to the email address of the Commission (delovodstvo@fsc.bg), the file must be previously archived. (6) After registration, each person submitting information receives a username and password for login to the system. The obligated person immediately notifies of any change in the person submitting the information. (7) If necessary, the Deputy Chairman publishes on the website of the Commission on the internet:
6. the format in which the information under para. 1 should be provided;
7. instructions for exporting the public key under para. 5;
8. a user guide and guidelines for filling in periodic reports and statements, as well as for naming files for submitting information.
   (8) For each publication under para. 7 and for published changes thereto, the Deputy Chairman notifies the obligated persons by letter.

Chapter Two
REQUIREMENTS FOR DATA TO DETERMINE THE VALUATION OF OBLIGATIONS UNDER INSURANCE CONTRACTS (Title am. - SG, No. 101 of 2022, effective from 01.01.2023.)
Section I
General Rules
Completeness of Data
Art. 14. (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) The insurer, respectively the reinsurer, ensures that the data used to determine the valuation of obligations under insurance and/or reinsurance contracts cover a sufficiently large period of observations and historical data that characterizes the measured reality, as well as with a sufficient level of detail to allow analysis of the models used. Suitability of Data Art. 15. (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) (1) The insurer, respectively the reinsurer, ensures that data related to different time periods are used by applying a consistent approach. (2) (Am. - SG, No. 101 of 2022, effective from 01.01.2023.) The insurer, respectively the reinsurer, applies corrections to historical data if necessary, to increase their reliability or to improve their quality as input data for determining more reliable valuations of obligations under insurance and/or reinsurance contracts and for better synchronization with the characteristics of the portfolio being evaluated and the future expected development of risks. Data for Determining the Size of Reserves for Outstanding Claims under Mandatory Insurance "Motor Third Party Liability" Art. 16. (Repealed - SG, No. 101 of 2022, effective from 01.01.2023).
Section II
Review and Validation of Data Quality
Data Checks
Art. 17. (1) The insurer, respectively the reinsurer, ensures that the actuarial function evaluates the accuracy and completeness of data through a sufficiently wide series of checks for compliance with the criteria under Art. 14 and 15 and to allow the disclosure of all significant deficiencies.
(2) The insurer, respectively the reinsurer, ensures that the actuarial function performs this evaluation at a sufficiently detailed level.
Consideration of Other Performed Analysis
Art. 18. The insurer, respectively the reinsurer, ensures that the actuarial function takes into account the conclusions of any relevant analysis performed during an external review, in which the quality of data in the context of calculating technical reserves was checked.
Consideration of Methodologies to be Applied
Art. 19. (1) The insurer, respectively the reinsurer, ensures that the actuarial function takes into account the relationship between the conclusions of the data quality analysis and the choice of methodologies to be applied for the valuation of technical reserves.
(2) The insurer, respectively the reinsurer, ensures that the actuarial function analyzes the extent to which the data used are suitable to support the assumptions underlying the methodologies applied for the valuation of technical reserves. If the data do not adequately support the methodologies, then the insurer, respectively the reinsurer, chooses an alternative methodology. (3) In evaluating the completeness of data, the insurer, respectively the reinsurer, ensures that the actuarial function takes into account whether the number of observations and the level of detail of the available data are sufficient and adequate to meet the requirement for input data for the application of the methodology. Source and Use of Data Art. 20. The insurer, respectively the reinsurer, requires the actuarial function to take into account the source and intended use of data in the process of data validation. Application of Expert Judgment Art. 21. The insurer, respectively the reinsurer, ensures that the use of expert judgment in the evaluation of accurate, suitable, and complete data for use in calculating technical reserves does not replace the appropriate collection, processing, and analysis of data, but supplements them when necessary. Validation Process and Feedback Art. 22. (1) The insurer, respectively the reinsurer, ensures that the actuarial function, within the tasks for coordinating technical reserves, also coordinates the evaluation and validation of the relevant data to be used in the valuation process. (2) The coordination task includes at least:

1. the selection of data to be used in the evaluation, taking into account the criteria for accuracy, suitability, and completeness of data, considering the methodologies most appropriate for use in calculation;
2. reporting all recommendations regarding the implementation of improvements in internal procedures, which are considered to have relevance for improving compliance with the criteria under item 1;
3. identifying cases where additional external data are needed;
4. evaluating the quality of external data as it is done for internal data, emphasizing whether market data are required, or when they should be used to improve the quality of internal data and whether and how improvements to the available data should be made;
5. evaluating whether any corrections should be made to the available data as part of actuarial good practices for improving the suitability and reliability of valuations obtained from actuarial and statistical methodologies for determining reserves based on these data;
6. recording all relevant conclusions made in the process of evaluation and validation, which may have significance for other steps in the calculation of technical reserves and which are related to the understanding of main risks and also to the knowledge of the quality and limitations of the available data.
   (3) For the purposes of para. 2, item 1, the relevant tools are used to check all significant differences that can be found in the data from the same year and within other relevant analysis.
   Section III
   Limitations on Data
   Identification of the Source of Significant Limitations Art. 23. The insurer, respectively the reinsurer, ensures that the actuarial function evaluates the accuracy, completeness, and suitability of data to identify all significant limitations of the data. If significant limitations are found, the sources of these limitations must also be identified. Impact of Deficiencies Art. 24. (1) To identify and evaluate the impact of all possible deficiencies that may affect compliance with data quality requirements, the insurer, respectively the reinsurer, ensures that the actuarial function takes into account all relevant available documentation related to internal processes and procedures for data collection, storage, and validation used for the evaluation of technical reserves, and where necessary, seeks more specific information by contacting personnel involved in these processes. (2) Additionally, the insurer, respectively the reinsurer, ensures that the actuarial function coordinates any relevant task that may be performed to evaluate the impact of deficiencies identified for the available data intended to be used in the calculation of technical reserves to obtain findings on whether the available data should be used for the intended purpose, or whether alternative data should be sought. Data Corrections Art. 25. (1) When a data shortage is identified, the insurer, respectively the reinsurer, ensures that the actuarial function evaluates whether the quality of data in relation to their purpose can be improved by correcting or supplementing the data. (2) The insurer, respectively the reinsurer, ensures that it uses appropriate measures to overcome data limitations arising from the exchange of information with business partners. (3) When external data are used, the insurer, respectively the reinsurer, ensures that the data remain in accordance with the standards of this chapter regarding data quality. (4) The insurer, respectively the reinsurer ensures that...