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EIOPA publishes updated technical methodology documentation for risk-free interest rate term structures for Solvency II
30/09/2016 14:45
​The European Insurance and Occupational Pensions Authority (EIOPA) published today an updated technical documentation on the methodology to derive the risk-free interest rate term structures (RFR) for Solvency II.
 
The changes were required in the following areas: 

  • The update of the representative portfolios to calculate the volatility adjustments (VA) on the basis of more up-to-date and granular data on the investments of the European (re)insurance companies. This update was announced on 1 July 2016, see here.  
  • The peer country for Cypriote government bond yields used for the calculation of the volatility adjustments and the fundamental spread was changed from Greece to Portugal.
  • The derivation of yields for corporate bonds of highest credit quality in case of negative yields.
  • The data source for Icelandic government bond rates.

The two VA calculation examples that supplement the technical documentation were updated in accordance with the update of the representative portfolios.

The changes were also reflected in an updated version of the source code used for the RFR calculation. EIOPA will base the calculation of the risk-free interest rate term structures for end of September 2016 on this updated technical documentation.

Furthermore, EIOPA published today changes to the relevant financial instruments used to derive the RFR. EIOPA will implement those changes for the calculation of the RFR end of December 2016.

The updated technical documentation, the updated VA calculation examples, the updated version of the source code and a specification of the changes to the relevant financial instruments can be accessed under "Background Material" he​re​​.