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    EIOPA Updates Methodology for RFR Calculation Under Solvency II

    October 08, 2019

    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.

     

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    Keywords: Europe, EU, Insurance, Reinsurance, Solvency II, Risk Free Interest Rate, Reporting, Refinitv Data, RFR Calculation, RFR Coding, EIOPA ‘

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