Regulatory Alerts2005-07-29
FMA Circular 05/2005 Concerning Negative Risk Premiums
The Austrian Financial Market Authority (FMA) issued this circular to prohibit the systematic use of negative risk premiums in occupational group insurance products to artificially boost old-age pension benefits. The regulator determined that such practices violate recognized actuarial principles and statutory requirements under the Insurance Supervision Act (VAG) because they rely on inappropriate probability assessments and create unsustainable technical account balances. Consequently, insurance undertakings must ensure that premium calculations and technical provisions adhere to sound actuarial methods that guarantee long-term obligation fulfillment and adequate survivor benefits.
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