MNB Raises Classic Life Insurance Policy Yield Threshold

MNB

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The National Bank of Hungary (MNB) on Wednesday said it is raising the maximum threshold for guaranteed yields on classic life insurance policies, according to a report by state news wire MTI.

The measure could reduce premiums on classic life insurance policies and pave the way for a "renaissance" of guaranteed-yield constructions, MNB said, noting that while policyholders shoulder the burden of investment risk for unit-linked policies, insurers take on the investment risk for classic life insurance policies.

The central bank and financial market watchdog is raising the upper threshold of the annual yield for forint-based classic life insurance policies with multiple premium payments from 1.8% to 4%. The threshold for the yield offered for single-premium policies with terms up to five years will rise to 7%, and the threshold for euro-based policies will be raised from 0.6% to 1.5%.

MNB calculated the changes taking into consideration long-term government securities yields, the Ultimate Forward Rate (UFR) of the European Insurance and Occupational Pensions Authority (EIOPA), and interest local insurers have been paid on mathematical reserves over the past two years.

In August, there were around 302,000 classic, multiple-premium life insurance policies in force in Hungary.

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