Regulatory Alerts2005-07-29
FMA Circular on Negative Risk Premiums in Occupational Group Insurance
The Austrian Financial Market Authority (FMA) issued this circular to prohibit the systematic use of negative risk premiums to boost old-age pension benefits in occupational group insurance schemes. The regulator determined that such practices violate recognized actuarial principles and the Insurance Supervision Act because they rely on inappropriate invalidity probabilities and create subjective risk regarding benefit claims. Consequently, insurance undertakings must ensure that technical provisions are calculated using sound actuarial methods that guarantee long-term solvency and adequate survivor benefits.
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