Resolution from the MNB on legal issues regarding the TCI Decree

The MNB has adopted a resolution on the interpretation of certain provisions of the MNB Decree No. 55/2015 (XII.22.) on the calculation and publishing the Total Cost Indicator (TCI), a tool used to compare cost burden of different life insurance plans.

MNB ruled that the costs arising from the performance fees to be paid by the underlying investment funds, reducing the net asset value thereof, shall be taken into account when calculating the TCI despite the fact that according to the Regulation 583/2010/EU only the so-called ongoing charges shall be taken into account, which do not include performance fees. The legal basis of MNB’s standpoint is that pursuant to the principle of the TCI calculation, all direct and indirect costs of the investment shall be taken into account when calculating and publishing the TCI values.

Another question concerned the riskfree rate of return to be used when calculating TCI. According to some insurers’ opinion, the TCI Decree renders that the riskfree rate of return used when calculating TCI and the riskfree rates of return published by EIOPA should be „consistent”, which allows the interpretation that the riskfree rates used by the insurers may differ from EIOPA’s published riskfree return rates. According to MNB’s opinion, this is not the case, insurers shall use the exact riskfree return rates published by EIOPA for TCI calculations.

Finally, MNB has answered the question whether TCI may apply to special life insurance products, such as death risk policies with an experience refund, or with savings element, where a minor amount is returned to the policyholder at the end of the term of the death risk policy. MNB found that since these kinds of policies either hold surrender value or provide insurance amount, they fall under the scope of the TCI Decree and a TCI value shall be calculated for these policies as well as for other life insurance policies with savings elements.

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