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Compared to the 2017 annual report, this year's annual report includes also an analysis on risk management aspects in view of the specific requirements for LTG measures set out in Article 44 and 45 of the Directive as well as an analysis of detailed features and types of guarantees of products with long-term guarantees.
Similar to previous years' analysis, this year's results show that most of the measures are widely used. 737 (re)insurance undertakings in 23 countries with a European market share of 74 % use at least one of the following voluntary measures:
The volatility adjustment and the transitional measure on technical provisions are particularly widely used. The volatility adjustment is applied by 696 undertakings in 23 countries to mitigate the effect of exaggerations of bonds spreads. The transitional measure on technical provisions is applied by 162 undertakings in 11 countries with respect to contracts concluded before the start of Solvency II in order to ensure a smooth transition to the new regime.
The average Solvency Capital Requirement (SCR) ratio of undertakings using the voluntary measures is 231 % and would drop to 172 % if the measures were not applied. This confirms the importance of these measures for the financial position of (re)insurance undertakings.
The vast majority of products with long-term guarantees occur in life insurance. For a more in-depth analysis the undertakings were requested to provide information on product features, on types of present guarantees and any changes that have been made to their products as well as the reasons for these changes. In general, the countries with a low proportion of products with guarantees have significant volumes of unit-linked life insurance. When the data is split between products that are in run-off and those still commercialised, it can be seen that fewer products that are still commercialised contain guarantees than products in run-off. This trend for fewer guarantees in commercialised products can be seen for all types of guarantee except guaranteed annuity benefits.
As regards the thematic focus an analysis on risk management aspects in relation to the regulatory reporting by undertakings of the LTG measures was conducted. Such requirements include:
National supervisory authorities identified room for improvement in relation to the level of detail of the regular supervisory reporting. In addition, they performed case studies to further explore how insurers build-in the results of the assessments on asset-liability management (ALM) into their overall ALM and risk management system. Practices observed vary across countries and measures.