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
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