General Information & Client Services
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
August 17, 2017

ESRB published a report on regulatory risk-free yield curve properties and their macro-prudential consequences. The report brings a macro-prudential perspective to the discussion on the design of the regulatory risk-free yield curve used in insurance supervision. The design of the regulatory yield curve is determined by the Solvency II framework and the insights in this report may inform possible amendments to Solvency II.

The report outlines the importance of the regulatory risk-free yield curve, including from a macro-prudential perspective. It also describes the requirements that the regulatory risk-free yield curve should fulfill from a macro-prudential perspective, along with how the regulatory risk-free yield curve is designed in Solvency II. The report then compares the current design with the macro-prudential requirements and draws policy conclusions. This report makes three proposals, which, under current market conditions and along with the forthcoming reduction in the Ultimate Forward Rate (UFR), would result in a lower regulatory risk-free yield curve. The findings of this report suggest that the current curve may underestimate insurers’ liabilities and, thus, generate unrealized losses. Specifically, the report proposes the following:

  • A new method to derive the last liquid point (LLP) and to extend the LLP for the euro regulatory risk-free yield curve from 20 to 30 years. 
  • Extending the convergence period (from LLP to UFR) from 40 years to 100 years. 
  • Blending the extrapolated part of the curve partly with market data, provided that sufficiently reliable market data are available, as, for instance, is done in the regulation of Swedish and Dutch pension funds. 


The exact impact of the proposed changes on the technical provisions of life insurers’ solvency should be carefully assessed before arriving at a conclusion about further changes to the regulatory risk-free yield curve. Comparison with the low-for-long yield stress curve used in the 2016 EIOPA stress test indicates that the overall impact of the proposals put forward in this report should be less significant than that of the EIOPA stress test. Potential second-round effects of a lower risk-free yield curve, such as those caused by insurers hunting for duration, should be monitored and may require additional macro-prudential policy measures. The analysis performed in this report provides a basis for further, ongoing reviews of the regulatory risk-free yield curve.


Related Link: ESRB Report (PDF)

Keywords: Europe, Insurance, Risk Free Yield Curve, Macro-prudential Policy, Solvency II, ESRB

Related Insights

US Agencies Propose Rule on Appraisals for Real Estate Transactions

US Agencies (FDIC, FED, and OCC) proposed a rule to increase the threshold level at or below which appraisals would not be required for the residential real estate transactions from USD 250,000 to USD 400,000. Comments will be accepted for 60 days from publication in the Federal Register.

December 07, 2018 WebPage Regulatory News

EBA Single Rulebook Q&A: First Update for December 2018

This week one answer was published as part of the Single Rulebook Questions and Answers (Q&A).

December 07, 2018 WebPage Regulatory News

FED Updates Reporting Form and Instructions for FR Y-14Q

FED published the updated reporting form FR Y-14Q for Capital Assessment and Stress Testing, along with the associated instructions.

December 06, 2018 WebPage Regulatory News

PRA Finalizes Policy on Minor Amendments to Regulatory Reporting

PRA published the policy statement PS30/18, which contains the final policy following a consultation (CP16/18) on certain amendments to regulatory reporting.

December 05, 2018 WebPage Regulatory News

GM of BIS Examines Regulatory Implications of Big Tech in Finance

Agustín Carstens, the General Manager (GM) of BIS, during the keynote address at the FT Banking Summit in London, spoke about new challenges and policy implications of big tech in finance.

December 05, 2018 WebPage Regulatory News

ACPR Publishes Version 2.8.1 of the CRD IV Taxonomy

ACPR notified that version 2.8.1 of the Capital Requirements Directive (CRD) IV Data Point Model taxonomy and version 2.1.0 of the Anti-Money Laundering and Terrorist Financing (LCB-FT) taxonomy have been made available.

December 04, 2018 WebPage Regulatory News

European Council Endorses Package on CRD 5, CRR 2, BRRD 2, and SRMR 2

European Council endorsed the agreement achieved between the presidency and the Parliament on the key measures of a comprehensive legislative package aimed at reducing risks in the banking sector in EU.

December 04, 2018 WebPage Regulatory News

BCBS Report Examines Cyber Resilience Practices Across Jurisdictions

BCBS published a report that identifies, describes, and compares the range of observed bank, regulatory, and supervisory cyber-resilience practices across jurisdictions.

December 04, 2018 WebPage Regulatory News

EIOPA Publishes Q&A on Regulations and Guidelines

EIOPA published new sets of questions and answers (Q&A) on guidelines, implementing regulations, and delegated regulations applicable to insurers in Europe.

December 03, 2018 WebPage Regulatory News

ESMA Registers A.M. Best (EU) Rating Services as Credit Rating Agency

ESMA, the direct supervisor of credit rating agencies (CRAs) in EU, has registered A.M. Best (EU) Rating Services B.V. as a CRA under the CRA Regulation, with effect from December 03, 2018.

December 03, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2316