Upon publication in the Federal Law Gazette, the package of regulations issued by the Austrian Financial Market Authority (FMA) to govern private life assurance is now in force.

The measures, which already take into account the requirements resulting from the migration to the European Union's new “Solvency II” supervisory regime as of 1 January 2016, respond to the economic problems (i.e. low interest rates and volatile capital markets) that surround the design of products.

The measures will hopefully ensure that insurance customers receive clear information about the prospects and risks that such products entail. The main measures in the FMA are as follows.

• The maximum guaranteed rate allowed for new contracts will decrease from 1.5% to 1.0% as of 1 January 2016. Rules are additionally defined that spell out how the rate is to be applied.
• To secure the guaranteed interest stipulated in existing contracts, the additional interest provision has to be increased and built up more quickly, depending on changes in the market environment. Should interest rates continue to stay at the current low level, this would result in additional interest provisions increasing to almost €1.5 billion by 2021. Allocation of an additional € 180 million to such provisions is consequently required for the 2015 financial year, as opposed to a minimum of €70 million in accordance with the previous formula.
• Information requirements applying to life assurance have been made more onerous in an attempt to benefit policyholders. To this end, the FMA has issued a Regulation on Information Requirements which sets out the information to be presented, especially before a life assurance contract is signed and at the moment it is signed. To facilitate comparisons between different insurance products, it says that the models used to calculate the benefits provided by insurers in relation to the premiums paid by policyholders must have uniform features. Other items include the consequences of premature termination and of exemption from premiums, which must be presented in clear terms. Another focus is on the disclosure of insurance costs, allowing the customer to recognise at-a-glance the share of premium paid that is actually available for investment. In 2016 insurance undertakings will also have to disclose the effective total interest and the effective guaranteed rate.