The Financial Supervision Commission considered and adopted at the first vote a draft Ordinance No. 10 on the requirements for the solvency margin and own funds of the pension insurance company, its recovery program and the minimum liquid assets of the company and the funds managed by it.

With the Act to Amend and Supplement the Social Insurance Code (promulgated SG No. 19/2021) significant changes have been made in the regulation of the payment of pensions from the universal pension funds and the related requirements to the capital of the pension insurance companies, according to the law, a number of these requirements should be developed or fully regulated by an ordinance of the Financial Supervision Commission.

The draft ordinance regulates the structure and the elements of the own funds of the pension insurance companies according to their purpose for covering the solvency margin. The fact that these funds serve as an additional guarantee for the fulfilment of the obligations for the payment of additional lifelong old-age pensions and deferred payments implies that the elements that make them up include only the funds that are reflected in the financial statements and are fully available to the respective company for use without restrictions to cover operating losses. In view of the purpose of own funds covering the solvency margin, they are offset by intangible assets that cannot be used to meet liabilities, accumulated losses, expected costs, etc.

The technical requirements in connection with the calculation of the solvency margin, which according to the Social Insurance Code is determined on the basis of the capitalized value of pensions and deferred payments with assumed guarantees, are regulated in detail. According to actuarial science, this value is determined on the basis of the present value of the commitments for these payments. In order to take into account the most recent mortality data and investment performance expectations, the mortality table published by the National Statistical Institute and the technical interest rate set by the pension insurance company as of the date of the pension or deferred payment calculation are used to determine this value.

Given the purpose of own funds covering the solvency margin of the pension insurance company, the ordinance requires them to be invested by it with the care of a good trader in compliance with the principles of quality, reliability, liquidity, profitability and diversification. The diversification of investments is also ensured through specific quantitative restrictions on the respective categories of instruments and investments in one issuer, explicitly specified in the Social Insurance Code.

The ordinance develops the requirements for the liquid assets of the pension insurance company and the funds managed by it, so as to ensure its ability to meet its current and expected obligations. The changes in the payment of the funds from the universal pension funds have been taken into account where after concluding a pension contract or a deferred payment contract the payment is not made by the pension fund, and the funds in the individual account of the person are transferred to the payment fund. In view of this, with regard to universal pension funds, it is required to maintain liquid assets, which, in addition to current liabilities, also take into account the funds transferred to the payment funds in the previous month.

The ordinance also regulates the requirements to the recovery programs of the pension insurance companies on the basis of the current regulation, adapted in accordance with the changes at the legal level. In connection with the amendments to the Social Insurance Code, the ordinance also updates the provisions of Ordinance No. 17 of 7.07.2004 on the documents required for issuing a permit for transformation of a pension insurance company and a supplementary pension insurance fund and on the requirements to the plans under Art. 327, para. 1, item 3 and Art. 336, para. 1 of the Social Insurance Code.

The draft and the reasons for it are published on the website of the Financial Supervision Commission in the section Regulations, subsection Public Consultations, and the deadline for submitting comments and proposals on the draft is 14 days from its publication until 24.06.2021 inclusive.

The Financial Supervision Commission considered and adopted at the first vote a draft Ordinance amending Ordinance No. 9 of 19 November 2003 on the manner and procedure for assessing the assets and liabilities of the supplementary pension funds and the pension insurance company, the net asset value of the fund, for calculating and declaring the value of one unit, for calculating and comparing the return on investment property and for the requirements for keeping individual accounts in order to comply with the changes made by the Act to Amend and Supplement the Social Insurance Code (promulgated SG No. 19/2021).

The draft ordinance regulates the methods for valuation of financial instruments in which the funds of the payment funds may be invested, and provides for the valuation to be carried out in accordance with the principles adopted for valuation of the same types of instruments in which the supplementary pension insurance funds can invest.

The draft ordinance regulates how the net asset value of a payment fund is determined and introduces the requirements for keeping the analytical accounts of the persons in a deferred payment fund. The scope and structure of the information to be contained in these accounts, including the transactions to be reflected in it, have been determined.

Other changes to the ordinance have been proposed in order to bring it into line with the amendments to the Social Insurance Code.

The draft and the reasons for it are published on the website of the Financial Supervision Commission in the section Regulations, subsection Public Consultations, and the deadline for submitting comments and proposals on the draft is 14 days from its publication until 24.06.2021 inclusive.

The Financial Supervision Commission conducted the XIX edition of the educational program: The Non-Banking Financial Sector in Bulgaria in partnership with the Ministry of Education and Science (MES) and the Atanas Burov Foundation.

The program is specifically aimed at students and teachers in secondary schools of economics. For the second year, the event took place online in the form of three webinars on 8, 15 and 22 October. On the three consecutive Fridays in October, the following topics were presented: Social Insurance Market, Insurance Market and Capital Market. For the first time, students were introduced to several new topics, namely Consumer Protection, Fintech Business Models and Cybersecurity and Cryptocurrencies.

The educational program welcomed the presentations of experts from the FSC and experienced specialists from both the private and public sectors. Vladimir Tashkov – Executive Director of the Atanas Burov Foundation presented to the participants the activities of the Atanas Burov Foundation and the opportunity to apply for student scholarships. The Association of Bulgarian Insurers presented the essence of insurance, types of insurance and the insurance market in Bulgaria. The students also got acquainted with the activities of the Financial Supervision Commission which regulates the non-banking financial sector in Bulgaria.

The lecture was followed by a practical step in which the participants virtually visited a pension insurance and insurance company, an investment firm and the Bulgarian Stock Exchange, where they witnessed how the capital market works, understood the nature of insurance and why pension insurance is necessary.

During the opening of the educational program, Ms. Denitsa Kirova – Secretary General of the Financial Supervision Commission thanked all partners involved in the program. In her address to the participants, she noted that the implementation of this educational program is especially important for the Financial Supervision Commission, because it presents the functioning of sectors that are extremely important for the Bulgarian economy.

“I am addressing you – students, and I would urge you to be alert, to discover the world constantly and with curiosity, to constantly seek answers to the questions that concern you. “I believe that the educational program “Non-Banking Financial Sector in Bulgaria” will give you valuable knowledge and will answer many of your questions,” said Ms. Kirova.

Thirty students and twelve teachers from secondary vocational schools with economic and financial profile from the cities of Blagoevgrad, Burgas, Varna, Veliko Tarnovo, Vidin, Velingrad, Gorna Oryahovitsa, Gotse Delchev, Dryanovo, Kyustendil, Kardzhali, Montana, Pazardzhik, Petrich, Pernik, Plovdiv, Razgrad, Ruse, Svishtov, Silistra, Sliven, Smolyan, Sofia, Stara Zagora, Haskovo and Shumen took part in the XIX edition of the educational program.

The program “Non-Banking Financial Sector in Bulgaria” is one of a kind for our country. It is one of the longest-standing initiatives of the Financial Supervision Commission, launched since its inception and has become a true tradition. The aim of the educational program is for students from secondary vocational schools in Bulgaria to get an excellent opportunity for career guidance in the non-banking financial sector, as well as to increase their knowledge and financial literacy, this is one of the strategic goals of the Commission – consumer protection through financial literacy.

The program ended on October 22, after the third webinar, with a virtual presentation of certificates to participants.

The Financial Supervision Commission adopted on a second vote an Ordinance on the technical interest rates under Art. 169, para. 1, item 3 and para. 8, item 3 of the Social Insurance Code and the formulas for calculating the supplementary lifelong old-age pensions after a repeated public consultation.

With the Act to Amend and Supplement the Social Insurance Code (promulgated SG No. 19/2021), regulating the payment of pensions for insurance in a universal pension fund, the legislator instructed the Financial Supervision Commission to determine by ordinance the formulas for their calculation, as well as the requirements to the technical interest rates for determining their amount and the pensions from the occupational pension funds.

The formulas for calculating the supplementary lifelong old-age pensions provided for in the ordinance are based on established provisions in actuarial science and practice. Defining uniform formulas for pensions from universal pension funds ensures the same way of calculating the pensions of all persons, regardless of the fund in which they are insured. The formulas provided in the ordinance make it possible to determine the amount of the pension on the basis of the transferred gross contributions or on the basis of the higher amount of funds in the individual account in accordance with the possibilities provided by law. Regardless of the chosen type of guarantee for determining the initial amount of the pension, all funds on the individual account of the person at the time of concluding the pension contract are taken into account. The formulas also allow, depending on the agreement between the pensioner and the pension insurance company, that the pension be determined both at the time of concluding the pension contract and from an earlier or later time (e.g. from the moment of acquiring the right to a pension or from at a later date if the pensioner wishes to continue working after the conclusion of the pension contract). The regulation of the formulas in a regulatory act provides clarity and legal certainty in the relations between the pension insurance companies and the pensioners, facilitates the future pensioners in planning their income after retirement and increases the transparency and trust in the activity of supplementary pension insurance.

When calculating the amount of pensions, a technical interest rate is used, which reflects the expectations for the return on investment of pensioners’ funds. The specific amount of the technical interest rate is determined by each pension insurance company in compliance with the prescribed regulatory requirements and is approved by the Financial Supervision Commission. The ordinance requires pension insurance companies to adhere to the precautionary principle when determining the specific amounts of technical interest rates in order to reduce the risk of shortage of funds for future payments, as adopted in actuarial practice. According to the legal delegation, the ordinance also regulates the maximum amounts of technical interest rates. In this regard, it is envisaged that the technical interest rate for determining the supplementary lifelong old-age pension may not be higher than the long-term interest rate for assessing the degree of convergence published by the Bulgarian National Bank (average for the last seven years). The indicator used is determined on the basis of the yield on long-term government securities, which according to the Social Insurance Code must be taken into account when determining the technical interest rate. With regard to pensions from occupational pension funds, the same indicator was used to set the maximum technical interest rate, setting a wider range (150 per cent of the long-term interest rate for assessing the degree of convergence) given the differences in their activities and investments. In both cases, the technical interest rate may not be less than zero.

The Financial Supervision Commission adopted at the second vote an Ordinance on the reserves of pension insurance companies to guarantee the gross amount of contributions to universal pension funds.

The Act to Amend and Supplement the Social Insurance Code (promulgated SG No. 19/2021), which introduces the regulation on the payment of pensions from universal pension funds, provides a mechanism for guaranteeing the gross insurance contributions of the persons insured in these funds. In particular, before the payment of a pension or a one-off or deferred payment in case of acquired pension rights from a universal pension fund, the individual account of the insured person is supplemented by the gross amount of insurance contributions reported by the National Revenue Agency and the National Social Security Institute. In order to implement the guarantee mechanism provided by law, the legislator delegated to the Financial Supervision Commission to determine by ordinance the requirements for the formation, calculation and maintenance of reserves of pension insurance companies to guarantee gross contributions, replenishment of reserves to the required amount and release of funds from them.

In this regard, the ordinance regulates the procedure for each pension insurance company establishing a reserve for guaranteeing gross contributions, requiring this to be done by the end of the month in which the first contribution to the universal pension fund was received, according to the latest information at that time (the fund’s net asset value on the last business day of the specified month). The allocation of funds to cover the reserve is made on the day of its creation. Similarly, the current recalculation of the reserve, its replenishment and release of funds from it are carried out at the end of the month for which the recalculation is made, based on the net asset value of the universal pension fund on the last working day of this month. The procedure for formation and recalculation of the reserve for guaranteeing the gross contributions regulated in the draft ensures its current adjustment in accordance with the legal requirements and parameters.

The Ordinance also amends Ordinance No. 12 of 10 December 2003 on the manner and procedure for determining the minimum return on asset management of supplementary mandatory pension insurance funds, to cover the difference to the minimum return and for the formation and use of the reserves for guaranteeing the minimum return, which are aimed at harmonizing and synchronizing with the regulation of the reserve for guaranteeing gross contributions and the amendments to the Social Insurance Code.

Today, 22.07.2021, at its meeting, the Financial Supervision Commission (FSC) adopted at the second vote an Ordinance on the requirements for the governance system of insurers and reinsurers.

The ordinance completes the national legal framework for the governance system of insurers and reinsurers in accordance with the Insurance Code (IC) and the guidelines of the European Insurance and Occupational Pensions Authority (EIOPA). Thanks to it, conditions are created for better management of the risks faced by Bulgarian insurers and reinsurers, and the guarantees for protection of the interests of the users of insurance services in the Republic of Bulgaria are strengthened. In the course of the public discussion of the Ordinance, the FSC took into account all received opinions, incl. and numerous suggestions, comments and remarks from the Association of Bulgarian Insurers.

With the ordinance, the FSC introduces into the national insurance and reinsurance legislation the following guidelines of EIOPA, which it has stated that it intends to comply with in its supervisory practice with regard to the management system of insurers and reinsurers:

1. Guidelines on the System of Governance (EIOPA-BoS-14/253 EN) and the Technical Annex thereto

These guidelines include the basic guidelines of EIOPA on the main aspects of the governance system of insurers and reinsurers, such as the requirements for the organization and operation of their management and supervisory bodies, the qualifications and reliability of their members and other key functions, risk management, structuring and operation of key functions, policies of the insurer regulating the most important aspects of its activities, internal control, outsourcing and specific aspects of the governance system at the level of a group of insurers and reinsurers.

2. Guidelines on Own Risk and Solvency Assessment (EIOPA-BoS-14/259 EN)

These guidelines include basic guidance on carrying out the important process of self-assessment of risk and solvency within the risk management system of insurers or reinsurers.

3. Guidelines on Complaints-Handling by Insurance Undertakings (EIOPA-BoS-12/069 EN)

These guidelines set out the procedures applied by insurers to deal with complaints lodged by users of insurance services.

In addition, the Ordinance provides for the FSC to issue instructions within 2 months of the Ordinance becoming effective, so as to ensure the application in its supervisory practice and the following guidelines of EIOPA:

4. Guidelines on Outsourcing to Cloud Service Providers (EIOPA-BoS-20-002)

These guidelines provide for specific requirements for the outsourcing to cloud service providers (services provided by data processing in the cloud), which are a source of additional risks for insurers and reinsurers and therefore require higher security requirements.

5. Guidelines on Information and Communication Technology Security and Governance (EIOPA-BoS-20/600)

These guidelines set out requirements to ensure compliance with the confidentiality, integrity and availability of information and information systems, as a guarantee to limit the operational risk to which insurers and reinsurers are additionally exposed as a result of the use of high technologies for storage, processing and access to data.

The new ordinance repeals Ordinance No 5 of 15.10.2003 on carrying out activity as an insurance broker and insurance agent (promulgated, SG 96/2003) and Ordinance No. 32 of 13.09.2006 on the requirements to the organization and the activity of the service for internal control of the insurer, the reinsurer and of the persons included in insurance or reinsurance group (promulgated, SG, 81/2006, amended and supplemented, issue 4 of 2010) which are issued on the basis of the repealed Insurance Act (repealed, SG No. 103/2005) and the repealed Insurance Code (repealed, SG No. 102/2015) and do not comply with the requirements of the current national and European legislation.

The ordinance provides for a 6-month period from its becoming effective, in which insurers and reinsurers should bring their policies, procedures and internal documents in line with the new requirements.

ESMA launches Common Supervisory Action with national competent authorities on the supervision of the costs and fees of Undertakings for the Collective Investment in Transferable Securities (UCITS) throughout the European Union

The joint supervisory action will take place in 2021. The purpose of this action is to establish whether the rules and legal framework regarding the obligation for investors not to be charged illegitimate costs are being complied with. Supervision of costs and fees is a key factor in ensuring investor confidence in the financial markets.

The full ESMA communication can be found at: ESMA launches a Common Supervisory Action with NCAs on the supervision of costs and fees of UCITS (europa.eu)

The European Insurance and Occupational Pensions Authority (EIOPA) is conducting a survey on the attitudes of potential European suppliers towards the supply of savings products. The aim is to collect the maximum amount of data and information available on the Pan-European Personal Pension Product (PEPP).

Regulation (EU) 2019/1238 on a pan-European personal pension product (PERP Regulation) was adopted in July 2019 and has been effective since August 2020. The publication in the Official Journal of the EU on 22.03.2021 of a Delegated Regulation (EU) 2021/473 to supplement the PEPP Regulation also sets a date of 22.03.2022 from which it will apply. With this decision, the European Commission provides an opportunity for EU citizens to save for their future retirement through a safe, transparent and high-quality pension product.

The link where the survey can be found is:

https://ec.europa.eu/eusurvey/runner/PEPP_survey, the latter being active until 31 May 2021.

The Financial Supervision Commission (FSC) informs all interested parties that at a meeting held on 26.10.2021 a decision was made to extend the deadline for submitting applications for admission to the examination for professional qualification of an insurance broker in accordance with Ordinance No. 28 of 10.05.2006 of the FSC, which will be held on 27.11.2021

The deadline for submitting applications has been extended to 01.11.2021, inclusive.

All interested persons should submit an application for admission to the examination according to an approved template, together with the attached documents under Art. 3, para. 2 of Ordinance No. 28 of 10.05.2006, namely: police clearance certificate or other similar document certifying the circumstances under Art. 303, para. 1, item 1 of the IC; a notarized copy of a diploma of higher education obtained in the country, respectively a legalized translation of a diploma of higher education obtained in a higher school outside the Republic of Bulgaria, to certify the circumstances under Art. 303, para. 2 of the IC and a declaration of the circumstances under Art. 303, para. 1, items 2 – 4 of the IC, according to a template.

Applications can be submitted every working day at the FSC office or signed with an electronic signature at the following e-mail address: delovodstvo@fsc.bg. A fee in the amount of BGN 450.00 (four hundred and fifty) shall be paid for taking the exam, based on Section I, item VI, line 15 in connection with Section IV, item IV of the Tariff of Fees Collected by the FSC under the Financial Supervision Commission Act, to the following bank account: IBAN: BG 95 BNBG 9661 3000 1415 01, BIC of BNB -Central office: BNBGBGSD.

The application must indicate the e-mail address to which messages on the open procedure for admission to the examination will be sent.

The topics covered by the examination are published on the FSC’s website, in the section “Supervised entities”, “Qualification examinations”, “Insurance brokers examinations”, where the list of admitted candidates will be announced, as well as all other announcements related to the conduct on this exam.

The examination will be conducted in accordance with all adopted anti-epidemic measures. In connection with Order No. РД-01-856 of 19.10.2021, supplemented on 21.10.2021, of the Minister of Health (MH) and in particular with item 2 and item 31, the admitted candidates should meet the requirement to be vaccinated or have recovered from COVID-19 or have a negative test result, certified by valid documents for vaccination, recovery or testing within the meaning of Order No. РД-01-733 of 27.08.2021 of the Ministry of Health.

The Financial Supervision Commission reminds all supervised entities that the deadline for payment in full of the annual fees for general financial supervision – processing of mandatory current and periodic information and for conducting inspections for 2022, as well as the fixed part of the fee under Section II, item I, line 36 of the Tariff for fees collected by the FSC – Annex to Art. 27, para. 1 of the Financial Supervision Commission Act is until January 31 of the current year.

The amount of the annual fees for general financial supervision is determined in Section II of the Tariff for fees collected by the Financial Supervision Commission – Annex to Art. 27, para. 1 of the Financial Supervision Commission Act (FSCA).

Bear in mind that interest for delay is due on the fee not paid within the deadline according to Art. 27, para 5 of FSCA. In case of non-payment of due fees, the Commission and its bodies may refuse to provide administrative services to the supervised entity until the fulfilment of their obligation to pay the fee, together with accrued interest for delay and costs of enforcement proceedings, in cases provided for in Art. 27, para. 5 of the FSCA.

Payments may be made at the cash desk of the Financial Supervision Commission or at the following bank account with the BNB:

IBAN: BG95BNBG96613000141501

BIC: BNBGBGSD

For additional information regarding the due fees and interest, before making the payment, you can contact the Finance and Accounting Department at tel. 02/94 04 691, 02/94 04 646 and /or 02/94 04 695.