The European Insurance and Occupational Pensions Authority (EIOPA) published its “Draft Report on Good Practices for Disclosure and Selling of Variable Annuities”  today and launched a public consultation.

This report summarises the findings of EIOPA’s Committee on Consumer Protection and Financial Innovation with the goal to establish good disclosure and selling practices for variable annuities.

Today, EIOPA invites market participants and consumers to participate in a consultation on consumer-related issues. EIOPA welcomes comments from all interested parties on the “Draft Report on Good Practices for Disclosure and Selling of Variable Annuities”.  Currently, EIOPA is seeking input on two sets of questions relating to disclosures and selling practices. These questions and the Draft Report can be accessed via our web site.

EIOPA’s chairman Gabriel Bernardino commented: “This is EIOPA’s first consultation in the area of consumer protection and of great significance to us. First of all, it links  our work in consumer protection with financial innovation. Secondly, even though the analysis that underlies the report has a product specific focus, the result of this consultation will certainly shape our view on how to deal with disclosures and selling arrangements for insurance contracts with an investment element.”

This consultation will start on Thursday 27 October, 2011 and end on 3 January 2012 at 18.00 HRS CET. Comments should be submitted via email to CP-007@eiopa.europa.eu. Please note that comments submitted after the deadline or not submitted on the provided template in Word cannot be processed.

Click here to read the “Draft Report on Good Practices for Disclosure and Selling of Variable Annuities”.

Click here to download the template to submit comments.

European financial markets have been very volatile over recent weeks.  The developments have raised concerns for securities markets regulators across the European Union.  ESMA has been actively monitoring the markets over the last few weeks and has been exchanging information with national competent authorities on the functioning of the markets and the market infrastructure. 

Given these recent market developments, ESMA wants to emphasise the requirements in the Market Abuse Directive (MAD) referring to the prohibition of the dissemination of information which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news^[1].  European competent authorities will take a firm stance against any behaviour that breaches these requirements and ESMA will support national authorities to act swiftly against any such behaviour which is clearly punishable.  While short-selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive.

In the area of short-selling regulation, many authorities already have either requirements for the disclosure of net short positions and/or bans of certain types of short sales in place^[2].  Recent developments have meant that all competent authorities have reinforced the monitoring of their markets and are keeping their regulatory requirements under review.  ESMA has coordinated discussions between the national competent authorities, specifically on the content and timing of any possible additional measures necessary to maintain orderly markets.  

Today some authorities have decided to impose or extend existing short-selling bans in their respective countries. They have done so either to restrict the benefits that can be achieved from spreading false rumours or to achieve a regulatory level playing field, given the close inter-linkage between some EU markets. These measures have been aligned as far as possible in the absence of a common EU legal framework in the area of short-selling and given the very different national legal bases on which such measures can be taken.

The following countries have today announced or will shortly announce new bans on short-selling or on short positions: Belgium, France, Italy and Spain^[3]. Information on these measures can be retrieved from the websites of the relevant competent authorities. The measures will take effect as of 12 August 2011.

[1]Articles 5 and1(2)(c) of MAD.

[2] List of measures adopted by competent authorities on short-selling: http://www.esma.europa.eu/popup2.php?id=7696.

[3]Greece already introduced a ban on short-selling on 8 August 2011.

At its meeting on 27 April 2011, FSC took the following decisions:

1. Approved a prospectus for initial public offering of an issue of shares, which will be issued as result of increase in the capital of Bulstrad Vienna Insurance Group Plc, city of Sofia. The issue is to the amount of 613 647 common shares with right to vote, with right to dividend and liquidation quota, proportionate to the par value of the share, with a par value to the amount of BGN 10 each and issue value of BGN 49. Entered in the public register the above stated issue / in process of issuing/.

2. Entered an issue of shares with the purpose of trading on a regulated securities market, issued as a result of increase in the capital of Investor BG AD, city of Sofia, from BGN  1 199 460 to BGN 1 438 695. The issue is at the amount of BGN 239 235, divided into 239 235 common, freely negotiable shares with right to vote, with a par value of BGN 1 each. 

3. Entered an issue of shares with the purpose of trading on a regulated securities market, issued as a result of increase in the capital of Industrial Holding Bulgaria AD, city of Sofia, from BGN 58 282 079 to BGN 67 978 543. The issue is at the amount of BGN 9 696 464, divided into 9 696 464 common shares with right to vote, with a par value of BGN 1 each. 

4. G P A Group JSC, city of Sofia, notified FSC of its intention to carry out activity as insurance broker on the territory of Romania under freedom to provide services within the EU. FSC will inform the relevant competent authority of the host Member State about the intention of the insurance broker.

At its meeting on 20 April  2011, FSC took the following decisions:

1. Approved a prospectus for initial public offering of an issue of corporate bonds, which will be issued by Sofia Hotel Balkan AD, city of Sofia. The issue is at the amount of Euro 10 000 000, divided into 100 000 common bonds with a par value of Euro 100 each, 10% annual interest, with interest payments every 12 months, the principal being paid in one lump sum on the maturity date, and the term of the bond loan is 10 years, considered from the date of the bond loan conclusion.  Entered in the public register the above issue / in process of issuing/.

2. Approved a prospectus for initial public offering of an issue of shares, which will be issued as a result of increase in the capital of Sofia Hotel Balkan AD, city of Sofia.  The issue is to the amount of 4 785 360 common shares entitling to one vote, right to dividend and liquidation quota, proportionate to the par value of the share, with a par value BGN 1 each and issue value of BGN 3.60 each. Entered in the public register the above issue / in process of issuing/.

3. Entered an issue of shares with the purpose of trading on a regulated market, issued as a result of increase in the capital of Asenova Krepost AD, town of Asenovgrad, from BGN  1 232 568 to BGN 3 632 568. The issue is to the amount of BGN 2 400 000, divided into 800 000 common shares with right to vote, with a par value of BGN 3 each.

4. Entered in the register Debitum Invest SPV, city of Sofia, as a public company.

The minimum rate of return on a year-on-year basis for the preceding 24-month period from 31.03.2009 to 31.03.2011 was   
4,79 percent from the management of the assets of the universal pension funds (UPF). Regarding the occupational pension funds (OPF), a minimum rate of return on an annual basis of 4,90 percent was determined for the same period. The weighted average rate of return of UPFs for the same period, calculated on an annual basis, was 7,98 per cent, and for OPF, respectively, it was 8,16 percent. All compulsory supplementary pension insurance funds reached a rate of return whose amount exceeded the set minimum level of rate of return for the relevant type of fund.

Social Insurance Supervision Division of FSC announced the final results of the activity in supplementary pension insurance for 2010. The information was obtained on the basis of the audited financial statements and statistics, submitted by the pension insurance companies at the Financial Supervision Commission.

As of 31 December 2010, the number of the insured persons in the four types of pension funds – universal, occupational, voluntary and voluntary under professional schemes, reached 3 882 883 persons, which represented an increase with 117 925 persons or by  3,13 percent compared to the insured in the end of 2009.

At 30 December 2010, the accumulated net assets in the system of supplementary pension insurance equaled to BGN 3 987 419 thousand and registered a growth of BGN 831 249 thousand, or 26,34 per cent in comparison with the net assets as of 31.12.2009.

The pension insurance companies closed the reporting 2010 year with total income to the amount of BGN 86 667 thousand, which represented an increase by 9,55 percent, compared to the recorded income in 2009. In 2010, the pension insurance sector realized a positive total net financial result to the amount of BGN 19 722 thousand, which represented a surge of this indicator by 18,83 in comparison with 2009.

The presented individual data from the insurer’s reports for 2010 are summarized and published on the FSC’s web page – www.fsc.bg, in section E-library, Statistics, Insurance Market. In the same section, there are also data published for reinsurance company G P Reinsurance EAD.

In 2010, the gross premium income realized by insures, having a legal seat in the Republic of Bulgaria, amounted to BGN 1 630 550 thousand, where a decline of 3,0 % on a year-on-year basis was observed. The gross premium income, realized by the general insurance companies at the end of 2010, amounted to BGN 1 384 741 thousand, whereby a decrease of 5,1 % on a year-on-year basis was realized.

The gross premium income, realized by life insuring companies at the end of 2010, amounted to BGN 245 809 thousand, recording a growth of 10,5 % on an annual basis.

The occurred claims in general insurance were to the amount of BGN 749 410 thousand, declining by 1,6 % y/y.

The paid claims by life insurers were to the amount of BGN 98 633 thousand, recording a growth of 8,2 % year-on-year.

At the end of 2010, the sum of the insurers’ assets climbed by 4,9 % on an annual basis and amounted to BGN 2 922 704 thousand, including 63,8 % of the general insurance companies and 36,2 % of the life insurance companies.

In the end of 2010, the amount of the general insurance companies’ investments came to BGN 1 200 687 thousand and surged by 9,0 % year-on-year. The amount of the life insurance companies came to BGN 914 511 thousand and increased by 8,3 % year-on-year.

The assets amount of reinsurer G P Reinsurance EAD was BGN 1 609 914 thousand in the end of 2010, towards BGN 1 083 988 thousand in the end of 2009. 

The amount of the reinsurer’s investments in the end of 2010 was BGN 1 243 053 thousand, compared to BGN 975 583 thousand a year earlier.

The total amount of the insurers’ equity grew by 1,1 % on an annual basis and reached BGN 977 369 thousand, including BGN 526 261 thousand of the insurers pursing business of general insurance, and BGN 451 108 thousand of the life insurance companies.

The amount of the gross technical provisions, set aside by the general insurance companies increased by 8,1 % year-on-year and reached BGN 1 375 820 thousand.

The amount of the gross technical provisions, set aside by life insurance companies went up by 13,8 % year-on-year and reached BGN 574 750 thousand.

The companies in the general insurance sector reported a negative technical result of BGN (-43 279) thousand in 2010, compared to BGN (-7 736) thousand in 2009, respectively a negative financial result of BGN (-16 385) thousand in 2010, compared to BGN 26 689 thousand in 2009.

By 31^st of March every year, the pension insurance companies must announce the achieved investment results (rate of return and investment risk) of the managed by them pension funds. The content and form of this information is specified in the Requirements to the advertising and written information materials of the pension funds and of the pension insurance companies. According to Item 23 of the above stated document, the information of the achieved investment results of the pension funds covers:

As of 31 March 2011, all pension insurance companies announced on their web sites information about the volume and structure of the investments by types of assets and securities issuers for each managed supplementary pension insurance fund. The information is disclosed in accordance with Art. 180 of the Social Insurance Code and the Requirements to the advertising and written information materials of the pension funds and of the pension insurance companies under Art. 123i, para 2 and Art. 180, para 2, Item 1 and Item  2 of the Social Insurance Code.

At 31.12.2010, the investments of all pension funds in debt instruments (bonds) were in overall 11 types of debt securities and 228 different issues, evaluated at the market value of BGN 1 761 111 030. The bonds occupied a share of 45.04% of the balance sheet assets of the universal pension funds, 41.27% of the balance sheet assets of the occupational pension funds, 41.59% of the balance sheet assets of the voluntary pension funds and 47.02% of the balance sheet assets of the voluntary pension funds under occupational schemes.

As of 31 December 2010, the investments of all pension funds in shares and other equity instruments were in overall 9 types of equity securities and 344 different issues evaluated at market value of BGN 1 055 964 344. The equity financial instruments account for 25.20%  share of the balance sheet assets of the universal pension funds, 28.23% of the balance sheet assets of the occupational pension funds, 31.20% of the balance sheet assets of the voluntary pension funds and 4.25% of the balance sheet assets of the voluntary pension funds under occupational schemes.

The data on the investments in 228 issues of debt and 344 issues of equity financial instruments at the end of 2010, in comparison with 184 issues of debt and 235 issues of equity financial instruments at the end of 2009, were indicative of the running of diversification processes in the pension funds through investments in a bigger number of issues, which if  appropriately combined had to result in reduction of the risk to the individual issuers and more optimal investment of the funds as rate of return-risk ratio.