​The Review of Long-Term Guarantees Measures and Measures on Equity Risk: Information Request

Insurance undertakings from the European Economic Area and subject to Solvency II are requested to provide the following information in the context of EIOPA's 3rd Long-Term Guarantees (LTG) Report due in 2018: 

  • Impact of the extrapolation of risk-free interest rates on the financial position of undertakings
  • Losses due to bond defaults and downgrades of bonds in matching adjustment portfolios
  • Availability of insurance products with long-term guarantees

The information is necessary to report on the impact of the application of the long-term guarantees measures and measures on equity risk as defined in Article 77f (1) of the Solvency II Directive.

The information on the extrapolation will be used to assess the dependency of the financial position of undertakings on the assumptions underlying the extrapolation. National supervisory authorities will contact a representative sample of undertakings regarding the provision of information on extrapolation and on insurance products.

The input on the matching adjustment will serve as a basis to assess whether the adjustment provides undue capital relief and should be provided by all insurance undertakings applying that measure.

The information on availability of insurance products with long-term guarantees will provide background for the analysis of the long-term guarantees measures.

Insurance undertakings should submit the completed reporting templates on extrapolation, matching adjustments and on insurance products  to the respective national supervisory authority. The templates should be filled according to the instructions in the technical specifications and taking into account the technical information. The technical information includes information on stressed risk-free interest rate term structures for the purpose of the calculation of the interest rate risk sub-module of the SCR standard formula.

 

Templates

Reporting template on extrapolation and matching adjustments (updated on 27 April 2018)

Reporting template on insurance products

Technical specifications on extrapolation and matching adjustments

Technical specifications on insurance products

Technical information (updated on 20 April 2018)

 

Questions and answers:

Q&A Info request to undertakings

Timeline
1 June 2018
​Deadline for insurance and reinsurance undertakings to submit results to national supervisory authorities

28 June 2018       

​Deadline for national supervisory authorities to report to EIOPA


The Long-Term Guarantees Review

The long-term guarantees (LTG) measures were introduced in the Solvency II Directive to ensure an appropriate treatment of insurance products that include long-term guarantees. The long-term guarantees measures are the following:

  • The extrapolation of risk-free interest rates
  • The matching adjustment
  • The volatility adjustment
  • The extension recovery period in case of non-compliance with the Solvency Capital Requirement
  • The transitional measure on the risk-free interest rates
  • The transitional measure on technical provisions 

The equity risk measures are the application of a symmetric adjustment mechanism to the equity risk charge and the duration-based equity risk sub-module. The measures on equity risk should ensure an appropriate allowance for equity risk in the capital requirement for insurance and reinsurance undertakings.  

According to Article 77f the Solvency II Directive requires a review of the LTG measures and the measures on equity risk by 1 January 2021. The review will consist of the following phases:

  • EIOPA's annual reports on the impact of the application of the LTG measures and the measures on equity risk to the European Parliament, the Council of the European Union and the European Commission. The reports published by EIOPA can be accessed here.
  • EIOPA's will submit an Opinion on the assessment of the application of the LTG measures and the measures on equity risk to the European Commission in 2020.
  • Based on EIOPA's Opinion the European Commission will submit a report on the impact of the LTG measures and the measures on equity risk to the European Parliament and to the Council of the European Union.