Featured Product

    EIOPA Sets Out Approach for IBOR Transition in EU

    September 30, 2021

    The European Insurance and Occupational Pensions Authority (EIOPA) published a report setting out its approach for the implementation of Interbank Offered Rate (IBOR) transitions. EIOPA will apply this methodology for the calculation of the risk-free interest rates for the first time in January 2022 for the British pound (GBP), Swiss franc (CHF), and Japanese yen (JPY), in accordance with the specified implementation approach. For the euro (EUR) and the US dollar (USD), EIOPA will not perform any major changes and will continue to monitor market developments closely. For the euro Credit Risk Adjustment (CRA), the overnight indexed swap (OIS) will change from EIONIA to ESTER in January 2022.

    The EIOPA methodology on IBOR transitions suggests that the change to the new curves shall take place instantaneously subject to several conditions that depend on whether the cessation of IBOR curve was announced and the time left before the cessation. The impact of the transition of the GBP, CHF, and JPY was estimated to be negligible for undertakings from the European Economic Area. It has been found that only a small number of undertakings, which are also well-capitalized, will be affected by this transition. EIOPA will implement the following changes from January 2022 onward:

    • GBP LIBOR curve will change to SONIA curve; the Last Liquid Point (LLP) will change from 50 to 30 years
    • CHF LIBOR curve will change to government bond curve; LLP will change from 25 to 15 years
    • JPY LIBOR curve will change to government bond curve and the LLP will remain unchanged at 30 years

    For the EUR, to this day, the transition remains uncertain since the EURIBOR is still very liquid and the discontinuation of the publication has not been decided. For the USD, the change is expected by mid-2023. Overall, the combined impact of the transition of the five currencies (EUR, GBP, CHF, JPY, and USD) was calculated to be on average -6.1% points to the solvency capital requirement (SCR) ratio, across the representative sample of 334 undertakings. In terms of impact, life and composite insurers seem to be the most affected compared to non-life insurers. To ensure a smooth transition, EIOPA will support market participants with the publication of two sets of curves (dual run) for three consecutive months prior to the transition date. 

     

    Related Links

    Keywords: Europe, EU, Insurance, LIBOR, EONIA, ESTER, Benchmark Reforms, IBOR, IBOR Transition, Risk-Free Rates, Benchmark Regulation, SCR, Solvency II, EIOPA

    Featured Experts
    Related Articles
    News

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    EP Reaches Agreement on Corporate Sustainability Reporting Directive

    The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).

    June 21, 2022 WebPage Regulatory News
    News

    PRA Consults on Model Risk Management Principles for Banks

    The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.

    June 21, 2022 WebPage Regulatory News
    News

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    News

    BIS Bulletins Discuss DeFi Lending and Aspects of Crypto-Assets

    The Bank for International Settlements (BIS) published bulletins on lending in decentralized finance (DeFi) system, on blockchain scalability and fragmentation of crypto, and on extractable value and market manipulation in crypto and decentralized finance.

    June 16, 2022 WebPage Regulatory News
    News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8292