Ministerial Decree of 26 October 2012 fixing the maximum reference interest rate for long-term life insurance operations

FEDERAL PUBLIC SERVICE ECONOMY,
SMEs, MIDDLE CLASS AND ENERGY
N. 2012 — 3276 [C − 2012/11432]
26 OCTOBER 2012. — Ministerial Decree fixing the maximum reference interest rate for long-term life insurance operations

The Minister of Economy and Consumers,
Having regard to Article 19, § 3, of the Law of 9 July 1975 concerning the supervision of insurance undertakings; Having regard to the decision of the National Bank of 18 October 2012 reducing the maximum interest rate for long-term life insurance from 3.75% to 2%, received on 18 October 2012; Whereas there is no unambiguous interpretation regarding Article 20.1.B.a) of Directive 2002/83/EC of the European Parliament and of the Council concerning life assurance, and whereas this provision was not retained in Directive 2009/138/EC of the European Parliament and of the Council on the access to and the exercise of the activities of the insurance and reinsurance undertakings (Solvency 2), which takes a different approach to the calculation of technical provisions and which must be transposed into Belgian law by 30 June 2013 and enters into force on 1 January 2014; Whereas the reference interest rate to be set concerns a maximum rate and the undertakings concerned are free to apply, for long-term life insurance operations, an interest rate lower than the maximum reference interest rate; Whereas a lower maximum reference interest rate is detrimental to competition in this sector, which is not desirable for consumers nor for the undertakings concerned. Insurance undertakings are not identical. They differ from each other in terms of business model, investment strategy, distribution channels, costs, etc. All this will be reflected in the interest rate offered, which can therefore also differ from one undertaking to another. A maximum reference interest rate that is too low may result in insurance undertakings not being able to offer consumers the interest rate they wish to offer, taking into account their own business model; Whereas a lower maximum reference interest rate will increase the importance of the profit-sharing component, thereby reducing the mutual comparability of products in terms of yield at the time of contract conclusion for the consumer; Whereas each undertaking concerned is required to offer an interest rate that is sufficiently prudent, taking into account its revenue and cost structure, and if this is not the case, the National Bank of Belgium as the prudential supervisor, in accordance with Article 21octies of the Law of 9 July 1975 concerning the supervision of insurance undertakings, may require a specific undertaking to take measures to bring a tariff into balance; Whereas financial institutions do not have a prescribed maximum reference interest rate for most financial products, such as bonds. The reason for this is precisely that each institution must price its products taking into account the duration, risk, cost structure, etc. These products without a prescribed maximum reference interest rate are also subject to a prudential risk over which the National Bank exercises supervision; Whereas in periods of financial crisis there is typically greater volatility in yields, which often deviate from their structural level, and that
crisis periods are of a temporary nature. Average yields over a long period better reflect the structural level. Thus, Assuralia, the professional association of insurance undertakings, states in its publication “The group insurance: a must, also for SMEs” of 26 May 2009 that pension contributions invested by insurers over the last 20 years yielded an average return of 6%. Given the importance of long-term stability for the credibility of the long-term life insurance product, no reduction in the reference interest rate can be accepted at this time,