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Application provision

1.1 Unless otherwise stated, this Part applies to:

  1. (1) a UK Solvency II firm;
  2. (2) in accordance with Insurance General Application 3, the Society, as modified by 16; and
  3. (3) in accordance with Insurance General Application 3, managing agents, as modified by 16.

8.1

31/12/2020

The changes to this rule are effective from 23:00 on 31/12/2020.

A firm must not apply a volatility adjustment to the relevant risk-free interest rate term structure to calculate the best estimate of its insurance or reinsurance obligations unless:

  1. (1) it has been granted a volatility adjustment approval; and
  2. (2) the volatility adjustment has been set out in Solvency II Regulations or published by the PRA under regulation 4B of the Solvency 2 Regulations.

8.2

01/01/2016

The volatility adjustment must not be applied to the risk-free interest rates of the relevant risk-free interest rate term structure that are derived by means of extrapolation in accordance with 5.

8.3

01/01/2016

Where a firm applies a volatility adjustment in accordance with 8, the extrapolation of the relevant risk-free interest rate term structure referred to in 5 shall be based on the risk-free interest rates adjusted with the volatility adjustment.

8.4

31/12/2020

The changes to this rule are effective from 23:00 on 31/12/2020.

A firm must only apply a volatility adjustment that includes a relevant country increase referred to in regulation 4B(6) of the Solvency 2 Regulations to calculate the best estimate of its insurance or reinsurance obligations of products sold in the insurance market of that country, respectively.

8.5

01/01/2016

The volatility adjustment shall not be applied with respect to insurance or reinsurance obligations where the relevant risk-free interest rate term structure to calculate the best estimate for those obligations includes a matching adjustment.

Additional Notes


[Note: Art. 77d and Art. 77e(3) of the Solvency II Directive]