EIOPA Updates Data to Calculate Volatility Adjustments Under SII
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
- Press Release on Updated Representative Portfolios
- Updated Representative Portfolios (XLSX)
- Updated Technical Documentation (PDF)
- Report on Administrative Sanctions Under IDD
Keywords: Europe, EU, Insurance, Solvency II, IDD, Insurance Distribution Directive, Volatility Adjustment, Risk-Free Rates, EIOPA
Featured Experts

Adam Koursaris
Asset and liability management expert; capable modeler; risk and capital specialist

Cassandra Hannibal
Life insurance actuary; risk management and economic capital specialist

Jerome Ogrodzki
Insurance asset and liabilities modeling specialist; stochastic modeling expert
Related Articles
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA Publishes Report on Asset Encumbrance of Banks in EU
EBA published the annual report on asset encumbrance of banks in EU.
MAS Revises Guidelines on Technology Risk Management
MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.
US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA Proposes Guidelines for Establishing Intermediate Parent Entities
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.