DNB Consults on Treatment of Savings Mortgages Under Solvency II
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
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
Previous Article
US Agencies Finalize Rule to Reduce Impact of Large Bank FailuresRelated Articles
APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
FSB Sets Out Good Practices for Crisis Management Groups
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
APRA Penalizes Heritage Bank for Incorrect Reporting of Capital
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
OSFI Releases Annual Report 2021-2022
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
OSFI Updates Timeline for Implementation of Certain Basel Rules
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
APRA Finalizes Capital Adequacy Standards for Banks
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.
