EIOPA modifies the methodology for calculating the relevant risk-free interest rate term structures for Solvency II

27 October 2015

Since February 2015 EIOPA publishes on a monthly basis relevant risk-free interest rate term structures that are based on the Solvency II Directive. The methodology for deriving those term structures is set out in a technical documentation published on EIOPA's website.

As part of an ongoing review of the methodology for calculating the term structures, European Insurance and Occupational Pensions Authority (EIOPA) has decided on the following modifications:

• The selection of financial instruments used to derive the basic risk-free interest rate term structures will be aligned to recent market developments in order to ensure that the term structures are based on information from deep, liquid and transparent markets.
• The treatment of government bonds issued by countries of the European Economic Area that are not Member States of the EU in the calculation of the volatility adjustment and the fundamental spread will be aligned to the treatment of government bonds issued by Member States.

The modifications will be implemented for the derivation of the term structures of end-October 2015, which will be published in November 2015. The technical documentation has been updated to reflect those modifications.

Furthermore the technical documentation was revised and supplemented with two Excel tools illustrating complex parts of the term structure calculations in order to improve the transparency of the calculations and facilitate their replication.

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