DNB published a document for consultation on the treatment of "savings mortgages" under Solvency II. The document describes how Solvency II deals with different forms of savings mortgages at insurers. It also explains how an insurer values the savings mortgage obligation (the savings deposit), how an insurer values the savings mortgage if the insurer provides the interest-only mortgage loan, and the situation in which a lender has provided the mortgage loan. The deadline for submitting responses is December 01, 2020.
A savings mortgage consists of an interest-only mortgage loan and a savings deposit where the policyholder can save at the contractually agreed interest on the interest-only mortgage loan, to repay the mortgage loan at the end of the term, plus risk insurance. Collectively, the interest-only mortgage loan and the savings deposit form an annuity-declining mortgage loan from the perspective of the policyholder or borrower. Insurers have savings mortgages in various forms on their balance sheet. An important factor in this is the role of the lender if the insurer has not provided the interest-only mortgage loan and the insurer passes on the savings premiums to the lender. The contract between the lender and the insurer largely determines the risks for the insurer and, therefore, also the valuation and capital requirements of savings mortgages. The document for consultation does not deal with the treatment of the risk insurance often associated with the savings mortgage. This document also does not address the consequences of savings mortgages for the resolvability of insurers, as DNB assesses in its resolution plans.
Related Links (in Dutch)
Comment Due Date: December 01, 2020
Keywords: Europe, Netherlands, Insurance, Solvency II, Savings Mortgage, Mortgage Loans, Regulatory Capital, DNB
Previous ArticleUS Agencies Finalize Rule to Reduce Impact of Large Bank Failures
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.
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).
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.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
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.
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.
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.
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.
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.
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.