27 February 2017

EIOPA updates the technical documentation of the methodology to derive the risk-free interest rate term structure

The European Insurance and Occupational Pensions Authority (EIOPA) published an update of the technical documentation of the methodology to derive the risk-free interest rate term structures.

Solvency II aims at implementing an economic and risk-based supervisory framework in the field of insurance and reinsurance. The framework is built upon three pillars, all equally relevant, that provide for quantitative requirements (Pillar 1), qualitative requirements (Pillar 2) and enhanced transparency and disclosure (Pillar 3).

The starting point in Solvency II is the economic valuation of the whole balance sheet, where all assets and liabilities are valued according to market consistent principles.

The risk-free interest rate term structure (hereafter in this letter, risk-free interest rate) underpins the calculation of liabilities by insurance and reinsurance undertakings. EIOPA is required to publish the risk-free interest rate. 

This technical document sets out the basis on which it will do so. It is the result of collaboration between EIOPA’s members and its staff.   

The update includes the following changes: 

• The government bond tickers for Bulgaria, China, India, South Africa, Taiwan and Thailand are discontinued by the data provider and are replaced accordingly. The new tickers are applied for reference dates as of 1 February 2017. 
• The annual update of the transition matrices for the calculation of the fundamental spreads in January 2017 was reflected in the technical documentation.

The changes will be taken into account in the production of the technical information for end of February 2017.

Full documentation

 

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