8
Volatility Adjustment
8.1
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) it has been granted a volatility adjustment approval; and
- (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.
- 31/12/2020
8.2
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.
- 01/01/2016
8.3
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.
- 01/01/2016
8.4
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.
- 31/12/2020
8.5
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.
[Note: Art. 77d and Art. 77e(3) of the Solvency II Directive]
- 01/01/2016