Featured Product

    EIOPA Updates Data to Calculate Volatility Adjustments Under SII

    December 16, 2020

    EIOPA published the updated representative portfolios for use in the calculation of the volatility adjustments to the relevant risk-free interest rate term structures for Solvency II. EIOPA will start using these updated representative portfolios for the calculation of the volatility adjustments at the end of March 2021, which will be published at the beginning of April 2021. EIOPA also published a report that provides an overview of the administrative sanctions or other measures imposed by national competent authorities under the Insurance Distribution Directive (IDD). The report shows that, in eight member states, nearly 1,923 administrative sanctions or other measures were imposed.

    For the calculation of volatility adjustments under Solvency II, EIOPA published the updated representative portfolios three months in advance to allow insurers and reinsurers sufficient time to prepare for this change. The updated portfolios are based on the end-of-2019 annual reporting templates as reported by European insurance and reinsurance companies to their national supervisory authorities. Due to the departure of UK from EU, the representative portfolios no longer include data from UK insurance and reinsurance undertakings. The updated portfolios enable more accurate reflection of the impact of market volatility under the Solvency II framework. EIOPA plans to revise the representative portfolios annually, with the next update being scheduled for the end of 2021, according to Article 194 of the Technical Documentation. EIOPA also updated the Technical Documentation on the methodology to derive risk-free rate term structures, with the results of Deep Liquid and Transparent assessment and the representative portfolios update for 2021.

    The volatility adjustments are derived from spreads of representative portfolios of assets. The representative portfolios are derived in accordance with Article 49 of the Commission Delegated Regulation 2015/35. The volatility adjustment is a measure to ensure the appropriate treatment of insurance products with long-term guarantees under Solvency II. Insurers and reinsurers are allowed to adjust the risk-free rates to mitigate the effect of short-term volatility of bond spreads on their solvency position. This way, the volatility adjustment prevents procyclical investment behavior of insurers and reinsurers.

     

    Related Links

    Keywords: Europe, EU, Insurance, Solvency II, IDD, Insurance Distribution Directive, Volatility Adjustment, Risk-Free Rates, EIOPA

    Featured Experts
    Related Articles
    News

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.

    July 29, 2021 WebPage Regulatory News
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    ECB Study Assesses Impact of Basel III Finalization Package

    The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.

    July 26, 2021 WebPage Regulatory News
    News

    ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading

    The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.

    July 26, 2021 WebPage Regulatory News
    News

    PRA Updates Remuneration Policy Statement Templates and Tables

    The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.

    July 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7311