EIOPA Updates Methodology for RFR Calculation Under Solvency II
EIOPA updated technical documentation of the methodology to derive the EIOPA risk-free interest rate term structures under Solvency II. Also published was the first parallel calculation on the relevant risk-free interest rate (RFR) term structures with reference to the end of September 2019; this calculation is based on the Refinitiv data and an updated version of the source code used for the monthly RFR term structures calculation. This parallel publication will allow stakeholders to compare their own calculations with those of EIOPA before use of Refinitiv as the main source of market data for the RFR term structures calculation becomes official. Stakeholders can submit comment on these publications by January 15, 2020.
The new risk-free rate methodology reflects changes in the main market data provider. It also includes updates due to the depth, liquidity, and transparency assessment of the financial market instruments used in the calculation of the term structures. The updated technical documentation would be effective for calculations from January 01, 2020 onward and applied for the first time in the production of the technical information for the reference date January 31, 2020. As of then, EIOPA will use Refinitiv as the main source for the RFR production process.
The RFR information with reference to the end of September 2019 and the RFR coding reflect the content of the technical documentation of the methodology to derive RFR term structures. The new risk-free rate methodology reflects changes in the main market data provider.The intended frequency of publication of the risk-free interest rate is monthly. Such a frequency will enable undertakings to have a common basis for calculating the value of the financial information they are required to report to their supervisor on a quarterly and annual basis.
Technical information in RFR term structures is used for the calculation of the technical provisions for (re)insurance obligations. In line with the Solvency II Directive, EIOPA publishes technical information related to RFR term structures on a monthly basis. This is intended to ensure consistent calculation of technical provisions across Europe and, thus, higher supervisory convergence for the benefit of the European insurance policyholders.
Related Links
- Press Release on Methodology
- Press Release on Calculations
- RFR Coding
- Technical Documentation (PDF)
- Risk-Free Interest Rate Term Structures
Keywords: Europe, EU, Insurance, Reinsurance, Solvency II, Risk Free Interest Rate, Reporting, Refinitv Data, RFR Calculation, RFR Coding, EIOPA ‘
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Related Articles
EBA Updates List of Validation Rules for Reporting by Banks
EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.
EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework
EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).
NGFS Advocates Environmental Risk Analysis for Financial Sector
NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.
MAS Issues Guidelines to Promote Senior Management Accountability
MAS published the guidelines on individual accountability and conduct at financial institutions.
APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans
APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.
SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks
SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.
FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms
FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.
ECB Updates List of Supervised Entities in EU in September 2020
ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.
OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management
OSFI published the key findings of a study on third-party risk management.
FSB Extends Implementation Timeline for Framework on SFTs
FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.
