Regulatory Alerts2005-02-01
FMA Circular on Negative Risk Premiums
The FMA clarifies that while negative risk premiums are standard in pension company products, their systematic and extensive application to boost old-age benefits is contrary to recognized actuarial principles and therefore prohibited. Pension companies offering low occupational disability pensions relative to coverage capital generate these negative premiums, which are credited to beneficiaries but require corresponding disability cases to free up necessary capital. Consequently, models relying heavily on extensive negative risk amounts must calculate positive and negative premiums separately in the technical account balance to comply with Article 15 of the PKG.
Share