Ordinance No. 10 of 29.06.2021 on Requirements for Solvency Margin, Own Funds, Rehabilitation Program, and Minimum Liquid Funds of Pension Insurance Companies and Managed Funds

ORDINANCE No. 10 of 29.06.2021 on the requirements for the solvency margin and own funds of the pension insurance company, its rehabilitation program, and the minimum liquid funds of the company and the funds managed by it Pub. - State Gazette, No. 59 of 16.07.2021; am. and add., No. 29 of 12.04.2022; am., No. 82 of 14.10.2022, in force from 14.10.2022; am. and add., No. 70 of 20.08.2024; am., No. 20 of 11.03.2025, in force from the date of introduction of the euro in the Republic of Bulgaria; repealed, No. 67 of 24.07.2026, in force from 01.01.2027 Adopted by Decision No. 221-N of 29.06.2021 of the Financial Supervision Commission

Section I
General Provisions

Art. 1. This Ordinance determines the requirements for:

1. the structure and elements of the own funds of the pension insurance company and the method of their calculation;
2. the method of calculating the solvency margin;
3. the investment of own funds covering the solvency margin;
4. the structure and content of the rehabilitation program to bring the own funds into compliance with the requirements of the Social Security Code (SSC);
5. the minimum liquid funds of the pension insurance company and the funds managed by it for additional pension insurance and funds for making payments.

Section II
Own Funds, Calculation of Solvency Margin, and Investment of Own Funds Covering the Solvency Margin

Art. 2. (Am. - SG, No. 82 of 2022, in force from 14.10.2022.) (1) The following elements are included in the own funds under Art. 121v, para. 5 of the SSC:

1. the paid-up share capital;
2. (repealed - SG, No. 82 of 2022, in force from 14.10.2022);
3. (am. - SG, No. 82 of 2022, in force from 14.10.2022) the "Reserve" fund, formed in accordance with Art. 246, para. 2 of the Commerce Act;
4. (am. - SG, No. 82 of 2022, in force from 14.10.2022) other general-purpose reserves provided for in the company's articles of association, which have been formed at the expense of its profit after taxation and/or with monetary contributions of the shareholders;
5. the reserve under Art. 192, para. 2 of the SSC;
6. the profit for the current period;
7. undistributed profit from previous periods;
8. a reserve formed from subsequent valuations of assets and liabilities leading to an increase in the reserve.

(2) The elements under para. 1 are included in the own funds under Art. 121v, para. 5 of the SSC only if they meet the following requirements:

1. the funds must be fully at the disposal of the pension insurance company and it must be able to use them without restrictions to cover losses from its activities;
2. their presence must be reflected in the financial statements of the pension insurance company.

(3) The own funds under para. 1 are reduced by:

1. the nominal value of repurchased own shares;
2. losses from the current year and uncovered losses from previous years;
3. a reserve formed from subsequent valuations of assets and liabilities leading to a reduction in the reserve;
4. intangible assets;
5. expenses for future periods;
6. capitalized costs under contracts with clients;
7. assets for current taxes;
8. deferred tax assets;
9. expected dividends and profit distributions;
10. foreseeable liabilities not reflected in the company's balance sheet for which there may be a need for outflows of resources containing economic benefits.

(4) The amount of own funds is calculated by reducing the sum of the values of the elements under para. 1, meeting the requirements of para. 2, by the sum of the values of the elements under para. 3.

Art. 3. (Am. - SG, No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) (1) (Am. - SG, No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) The solvency margin of the pension insurance company amounts to 4 percent of the capitalized value of the assumed liabilities for the payment of additional lifelong old-age pensions and the deferred payments under Art. 167a, para. 1 of the SSC, but not less than 3.750 million euros.

(2) The capitalized value of the assumed liabilities for the payments under para. 1 is equal to the sum of:

1. the present value of the payments due to pensioners and their heirs after the last update in accordance with Art. 169v, para. 1, 2 and 4 and Art. 170, para. 6 of the SSC and the last recalculation of pensions in accordance with Art. 169g of the SSC, and
2. the payments due to persons receiving deferred payments under Art. 167a, para. 1 of the SSC and their heirs after the last update in accordance with Art. 169v, para. 1, 3 and 5 and Art. 170, para. 6 of the SSC and the last recalculation of deferred payments in accordance with Art. 169g of the SSC.

(3) The present value of the payments due to pensioners is calculated on the basis of:

1. the approved technical interest rate, current as of the date of calculation;
2. the mortality table and average remaining life expectancy published by the National Statistical Institute;
3. the remaining periods of guaranteed payment of pensions under Art. 167, para. 4, item 2 of the SSC;
4. the remaining periods of deferred payment of pensions under Art. 167, para. 4, item 3 of the SSC;
5. the age of pensioners as of the date of the calculation.

(4) When calculating the present value of the payments due to pensioners during the first 6 months of the year, the statistical information under para. 3, item 2, published in the previous year, is used, and during the second 6 months of the year, the statistical information under para. 3, item 2, published in the current year is used.

(5) The present value of the payments due to the heirs of deceased pensioners is calculated on the basis of:

1. the approved technical interest rate, current as of the date of calculation;
2. the remaining periods of guaranteed payment of pensions under Art. 167, para. 4, item 2 of the SSC from the dates of death of the respective pensioners;
3. the remaining periods of deferred payment of pensions under Art. 167, para. 4, item 3 of the SSC from the dates of death of the respective pensioners.

Art. 4. (Am. - SG, No. 29 of 2022.) (1) The pension insurance company invests the own funds covering the solvency margin with the care of a good merchant, observing the principles of quality, reliability, liquidity, profitability, and diversification.

(2) Not more than 5 percent of the funds under para. 1 may be invested in financial instruments issued by a single issuer, with this limit:

1. not including the debt securities under Art. 176, para. 1, item 1, letters "a" and "b" of the SSC;
2. not including the debt securities under Art. 176, para. 1, item 1, letter "v" of the SSC with an investment credit rating;
3. (repealed - SG, No. 29 of 2022).

(3) Not more than 10 percent of the funds under para. 1 may be invested in securities under Art. 176, para. 1, item 1, letter "g" of the SSC.

(4) Not more than 10 percent of the funds under para. 1 may be invested in securities under Art. 176, para. 1, item 1, letter "d" of the SSC.

(5) Not more than 15 percent of the funds under para. 1 may be invested in securities under Art. 176, para. 1, item 2 of the SSC, with not more than 5 percent of the funds under para. 1 being in bonds issued by a local authority that are not traded on a regulated market.

(6) Not more than 10 percent of the funds under para. 1 may be invested in financial instruments under Art. 176, para. 1, item 3 of the SSC.

(7) Not more than 20 percent of the funds under para. 1 may be invested in financial instruments under Art. 176, para. 1, item 4 of the SSC.

(8) (Am. - SG, No. 29 of 2022.) Not more than 25 percent of the funds under para. 1 may be invested in deposits in one bank.

Section III
Requirements for the Structure and Content of the Rehabilitation Program of the Pension Insurance Company

Art. 5. The rehabilitation program to bring the own funds of the pension insurance company into compliance with Art. 121v, paras. 5 - 7 of the SSC must necessarily include:

1. a section on the current financial condition of the company, including:
   a) the company's balance sheet as of the date of preparation of the rehabilitation program; b) an analysis of the financial condition of the company and the causes leading to the violation of Art. 121v, para. 6 of the SSC; c) the amount of additional funds needed to bring the own funds to the size under Art. 121v, para. 6 of the SSC;
2. a section on the planned measures to bring the own funds of the company into compliance with the requirements under Art. 121v, paras. 5 - 7 of the SSC, including:
   a) the deadlines for bringing the own funds of the company into compliance with the requirement under Art. 121v, para. 4 of the SSC in accordance with Art. 121v, para. 10 of the SSC; b) the specific measures and justification of how these measures will bring the own funds into compliance with the regulatory requirements; c) the deadlines for implementing the measures under letter "b"; d) the units and/or persons responsible for implementing the measures under letter "b"; e) the sources of funds for the implementation of the program;
3. a section on the forecasted financial condition of the company, containing:
   a) a forecasted assessment of its income and expenses until the expiration of the deadlines under item 2, letter "a"; b) a forecasted balance sheet as of the end of the deadlines provided for in the program under Art. 121v, para. 10 of the SSC;
4. the number and date of the decision of the management body of the company by which the rehabilitation program was adopted.

Section IV
Minimum Liquid Funds of the Pension Insurance Company and the Funds Managed by It

Art. 6. (Am. - SG, No. 29 of 2022; am., No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) (1) The liquid funds of the pension insurance company are:

1. cash on hand;
2. cash in settlement accounts in banks that are not in insolvency proceedings;
3. (am. - SG, No. 29 of 2022) cash payable on demand, in deposits in banks that are not in insolvency proceedings;
4. receivables from the funds managed by the company;
5. debt securities under Art. 176, para. 1, item 1 of the SSC with a remaining term to maturity of not more than one year;
6. debt securities under Art. 176, para. 1, item 1, letters "a" - "v" of the SSC outside those specified in item 5, which simultaneously meet the following requirements:
   a) they are not held to maturity; b) they have an investment credit rating, and c) they are admitted to trading on a regulated market in a member state or on a market under Art. 5, para. 1 of Ordinance No. 29 of 12.07.2006 on the minimum level of credit ratings of banks and for determining the states, international financial organizations, markets, and indices of these markets in accordance with Art. 176, para. 2 of the Social Security Code (SG, No. 62 of 2006).

(2) Liquid cash funds are cash in:

1. (am. - SG, No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) euros, US dollars, and Swiss francs;
2. other currencies in which the current liabilities of the pension insurance company are denominated, to the extent necessary for the fulfillment of these liabilities.

(3) In the event of a pledge of assets or if there is any other restriction on their use by the pension insurance company, they are not included in the liquid funds under para. 1.

Art. 7. The pension insurance company must constantly have liquid funds in an amount not less than the current liabilities of the company.

Art. 8. (Am. - SG, No. 29 of 2022; add., No. 70 of 2024; am., No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) (1) The liquid funds of the funds for additional pension insurance are determined in accordance with Art. 6, para. 1, items 1 - 3, 5, and 6.

(2) Liquid cash funds are cash in:

1. (am. - SG, No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) euros, US dollars, and Swiss francs;
2. other currencies in which the current liabilities of the fund for additional pension insurance are denominated, to the extent necessary for the fulfillment of these liabilities.

(3) Assets for which there is a restriction on their use by the fund for additional pension insurance are not included in the liquid funds.

(4) The universal pension fund must constantly have liquid funds in an amount not less than the sum of:

1. (am. - SG, No. 29 of 2022) the accrued amounts for payment to the insured persons, including persons with individual accounts under Art. 127, paras. 6 and 7 of the SSC, and their heirs;
2. its current liabilities to the pension insurance company;
3. other current liabilities;
4. funds transferred during the previous month to the funds for making payments.

(5) (Am. - SG, No. 29 of 2022) The professional pension fund, the fund for additional voluntary pension insurance, and the fund for additional voluntary pension insurance under professional schemes must constantly have liquid funds in an amount not less than the sum of the accrued amounts for payment to the insured persons, pensioners, and their heirs and the funds under para. 4, items 2 and 3.

(6) (New - SG, No. 70 of 2024) In the voluntary pension fund for PEPP, the liquid funds are determined separately for each sub-fund therein based on the assets and liabilities acquired, respectively, incurred in connection with the activities of the sub-fund, applying respectively paras. 1 - 3, para. 4, item 2 and 3, and para. 5.

Art. 9. (Am. - SG, No. 29 of 2022; am., No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) (1) The liquid funds of the funds for making payments are determined in accordance with Art. 6, para. 1, items 1 - 3 and items 5 and 6.

(2) Liquid cash funds are cash in:

1. (am. - SG, No. 20 of 2025, in force from the date of introduction of the euro in the Republic of Bulgaria) euros, US dollars, and Swiss francs;
2. other currencies in which the current liabilities of the respective fund for making payments are denominated, to the extent necessary for the fulfillment of these liabilities.

(3) Assets for which there is a restriction on their use by the respective fund for making payments are not included in the liquid funds.

(4) Each fund for making payments must have at the end of each month:

1. (am. - SG, No. 29 of 2022) liquid funds under Art. 6, para. 1, items 1 - 3, 5, and 6 in an amount not less than the payments due to pensioners, respectively, persons receiving deferred payments under Art. 167a, para. 1 of the SSC, and their heirs for the next 6 months and its other current liabilities;
2. liquid funds under Art. 6, para. 1, items 1 and 2 in an amount not less than the payments due to pensioners, respectively, persons receiving deferred payments under Art. 167a, para. 1 of the SSC, and their heirs and its other current liabilities for the next month.

Section V
Accounting and Control

Art. 10. (In force from 01.08.2021; am., No. 70 of 2024.) (1) The pension insurance company submits to the Financial Supervision Commission by the 20th day of each month reports in the form attached as of the end of the previous month, as follows:

1. a report on the amount of own funds under Art. 121v, para. 5 of the SSC and of the liquid funds of the company (Appendix No. 1);
2. (am. - SG, No. 70 of 2024) a report on the liquid funds of each managed fund for additional mandatory pension insurance, fund for additional voluntary pension insurance, and fund for additional voluntary pension insurance under professional schemes and for each sub-fund in the voluntary pension fund for PEPP (Appendix No. 2);
3. a report on the liquid funds of each managed fund for making payments (Appendix No. 3).

(2) For the purposes of the reports under para. 1, item 1, as of the end of each month except December, the capitalized value of the assumed liabilities for the payments under Art. 3, para. 1 is determined by adjusting the present value of the payments due under Art. 3, para. 2, item 1 and the payments due under Art. 3, para. 2, item 2 as of 31 December of the previous year with the receipts, payments, updates, and recalculation arising in the period between that date and the end of the reporting month.

Transitional and Final Provisions

§ 1. Pension insurance companies submit the reports under Art. 8 of Ordinance No. 10 of 26.11.2003 on the requirements for the composition and structure of the own capital (capital base) of the pension insurance company, its rehabilitation program, and the minimum liquid funds of the company and the funds managed by it for additional pension insurance (SG, No. 109 of 2003) as of the end of June 2021 by 20.07.2021 and as of the end of July by 20.08.2021 in the forms according to Appendix No. 1 to Art. 8, item 1 and Appendix No. 2 to Art. 8, item 2 thereof.

§ 2. Proceedings initiated before the entry into force of this Ordinance under Art. 321, paras. 1, 3, and 4, Art. 323, para. 1, Art. 327, para. 1, Art. 331, para. 1, and Art. 336, para. 2 of the SSC are completed according to the previous procedure.

§ 3. Ordinance No. 10 of 26.11.2003 on the requirements for the composition and structure of the own capital (capital base) of the pension insurance company, its rehabilitation program, and the minimum liquid funds of the company and the funds managed by it for additional pension insurance (publ., SG, No. 109 of 2003; add., No. 19 of 2004; am. and add., No. 106 of 2006; am., No. 94 of 2009; am. and add., No. 50 of 2018; am., No. 41 of 2019) is repealed.

§ 4. The following amendments and additions are made to Ordinance No. 17 of 7.07.2004 on the documents necessary for the issuance of a permit for the transformation of a pension insurance company and a fund for additional pension insurance and on the requirements for the plans under Art. 327, para. 1, item 3 and Art. 336, para. 1 of the Social Security Code (publ., SG, No. 65 of 2004; am. and add., No. 102 of 2007, No. 18 of 2018, and No. 41 of 2019):

1. In Art. 1, item 1, the words "and funds for additional pension insurance" are replaced with "and the funds managed by them for additional pension insurance and funds for making payments".
2. The following amendments and additions are made to Art. 2:
   a) in para. 1:
   aa) in item 2, letter "g", after the word "shares" the words "under the individual accounts" are added; bb) in item 5, the words "their shares" are replaced with "the shares under the individual accounts"; vv) in item 6, the words "the managed funds and for the realized profitability for each fund" are replaced with "the managed funds for additional pension insurance and funds for making payments and for the realized profitability for each fund for additional pension insurance"; gg) in item 8, the words "Art. 3, item 12" are replaced with "Art. 3, item 13"; dd) item 9 is amended as follows:
   "9. the reports under Art. 10, para. 1 of Ordinance No. 10 of 29.06.2021 on the requirements for the solvency margin and own funds of the pension insurance company, its rehabilitation program, and the minimum liquid funds of the company and the funds managed by it (Ordinance No. 10) (SG, No. 59 of 2021), prepared as of the date under Art. 3, item 13;" ee) item 10 is amended as follows:
   "10. the reports under Art. 23, paras. 1 and 2 of Ordinance No. 9 of 2003 on the method and procedure for the valuation of assets and liabilities of the pension insurance company and the funds managed by it, the net asset value of the funds, the calculation and announcement of the value of one share, the calculation and comparison of the profitability from their investment properties, and the requirements for the maintenance of individual accounts and analytical accounts in a fund for deferred payments (Ordinance No. 9) (SG, No. 109 of 2003) of each managed fund, prepared as of the date under Art. 3, item 13;" zz) a new item 12 is created:
   "12. the reports on the reserves for guaranteeing the gross contributions for each universal pension fund in accordance with Art. 5 of Ordinance No. 68 of 10.06.2021 on the reserves of pension insurance companies for guaranteeing the gross amount of contributions in universal pension funds (Ordinance No. 68) (SG, No. 52 of 2021);" zzz) in item 15, the words "para. 4, item 5" are replaced with "para. 4, item 6"; iii) in item 16, after the words "managed funds" the words "for additional pension insurance" are added; kkk) a new item 17 is created:
   "17. the rules of each fund for making payments after transformation and the decisions on their amendment or adoption;" lll) the current item 17 becomes item 18 and is amended as follows:
   "18. the actuarial calculations for the proposed pension schemes in each fund after transformation, the biometric tables for each fund for additional voluntary pension insurance after transformation, and the personal data of the responsible actuary of the company;" mmm) the current item 18 becomes item 19 and in it the words "paras. 1 and 2" are replaced with "paras. 1 - 3"; nnn) the current items 19 - 23 become respectively items 20 - 24; b) in para. 2, item 3 is amended as follows:
   "3. the procedure and method for determining the ratio of exchange of shares under the individual accounts of insured persons and pensioners in the managed funds for additional pension insurance as of the date of transformation under Art. 263j, para. 1 of the Labor Code, the methods for valuing the assets of the funds for additional pension insurance and funds for making payments, and the difficulties in valuation, if any have arisen."
3. The following amendments and additions are made to Art. 3:
   a) in item 1, the words "para. 1" are replaced with "paras. 1 - 3"; b) in item 2, the words "total number of shares and the value of one share" are replaced with "as well as the total number of shares and the value of one share for each fund for additional pension insurance"; c) in item 3, after the word "shares" the words "under the individual accounts" are added; d) in item 4, the word "rules" is replaced with "applied rules", and the words "of each" are replaced with "of each"; e) in item 5, the words "its funds" are replaced with "the funds of each fund for additional pension insurance"; e) in item 9, after the words "the respective funds" the words "for additional voluntary pension insurance" are added; z) a new item 10 is created:
   "10. the total amount of reserves formed in each company participating in the transformation for guaranteeing the payment of lifelong pensions for the respective funds for payment of lifelong pensions, their compliance with the assumed liabilities to pensioners, and the method of their management after transformation;" z) the current item 10 becomes item 11 and in it after the words "Art. 193, para. 8" the words "and 193a, para. 1" are added; i) the current item 11 becomes item 12 and in it the number "10" is replaced with "11", and the number "12" is replaced with "13"; k) the current items 12 - 14 become respectively items 13 - 15; l) the current item 15 becomes item 16 and in it the words "pension reserves" are replaced with "reserves under Art. 192, para. 2, Art. 193, para. 8, Art. 193a, para. 1, and Art. 213, para. 2 of the SSC"; m) the current items 16 - 19 become respectively items 17 - 20.
4. The following amendments and additions are made to Art. 4, para. 1:
   a) in item 2, letter "b", after the words "exchange of shares" the words "under the individual accounts" are added, and after the words "managed fund" the words "for additional pension insurance" are added; b) in item 6, the words "items 4 - 11 and 14 - 23" are replaced with "items 4 - 12 and 14 - 24".
5. In the title of Section IV, after the words "pension insurance" the words "and fund for making payments" are added.
6. The following amendments and additions are made to Art. 5:
   a) in para. 1:
   aa) in item 2, after the words "injection of the fund" the words "for additional pension insurance and of the funds for making payments" are added; bb) in item 4, at the end the words "for additional