The PFSA's product intervention concerning unit-linked life insurance contracts

Available languages: PL

On 15 July 2021, the Polish Financial Supervisory Authority (the “PFSA”) issued a so-called product intervention, which had been long-awaited by the market. Pursuant to the PFSA’s decision, as of 1 January 2022, unit-linked life insurance contracts that meet the criteria indicated by the PFSA cannot be marketed, distributed, or sold.

What products are affected by the prohibition?

The prohibition applies to unit-linked life insurance contracts that meet at least one of the following criteria:

  1. the average return is less than 50% of the interest rate for the period specified in the decision according to the relevant risk-free interest rate term structure; or

  2. the investment rules and restrictions defined in the regulations of the unit-linked fund fail to ensure that the assets of the unit-linked fund will not be invested in contingent convertible instruments1.

What are the exemptions to the prohibition?

The PFSA has explicitly indicated that:

  • the prohibition does not apply to Employee Capital Plans, Occupational Pension Schemes, Individual Retirement Protection Accounts and Individual Pension Accounts;

  • the prohibition concerning contingent convertible instruments does not apply to life insurance contracts if they are related to a unit-linked fund established before 1 January 2022, and the method of investing the assets of the fund ensures that the assets are not invested in contingent convertible instruments;

  • the insured party’s act of joining a group unit-linked life insurance contract concluded before 1 January 2022, as well as individual continuation of group unit-linked life insurance contracts, do not fall within the substantive scope of the decision.

Who should take action?

The PFSA expects that both domestic and foreign insurance undertakings offering insurance in Poland will comply with the decision. Moreover, domestic insurance undertakings have been obliged to apply the decision also to unit-linked life insurance contracts offered outside Poland.

Insurance undertakings should therefore take action to adjust their products to the requirements set out in the decision. The PFSA has already announced inspections in this regard. We encourage you to contact us in order to obtain detailed information on the decision and actions that should be implemented in the insurance undertaking in connection with this.

[1] The PFSA indicates that it understands contingent convertible instruments to be capital notes, subordinated loans and/or other instruments and contracts under which in the case of the occurrence of a trigger event defined in the terms of issue or contract, the issuer or debtor cancels the instruments/contracts, by way of an impairment loss or a temporary write-down of the nominal value of the instrument or liability in whole or in part, or converts the instruments/contracts into shares, or cancels the interest, in whole or in part, for the relevant interest period, or suspends the interest payments for an indefinite period, if such capital notes, subordinated loans, instruments are issued, or such contracts are concluded, by the debtor to qualify them, or if they have been qualified, as regulatory capital of banks and brokerage houses, or as own funds of insurance undertakings or reinsurance undertakings.