On 21 December, EIOPA published an opinion on disclosure of information related to the use of transitional measures in the calculation of technical provisions. The National Supervisory Authorities have expectations in relation to the disclosure of information in the Solvency and Financial Condition Report (SFCR) regarding the use of the transitional measures, in particular considering the impact of the methodology used for the decrease of the transitional measures. The aim of the opinion is to clarify these expectations.
The application of the transitional adjustment to the relevant risk-free interest rate term structure and the transitional deduction to technical provisions are also known as transitional measures and are addressed in articles 308c and 308d of Solvency II. During the year starting from 1 January 2016 the effect of the transitional measures shall be 100%, decreasing linearly at the end of each year to 0% on 1 January 2032 as indicated in the third subparagraph of article 308c(2) and the second subparagraph of article 308d(2). Therefore, based on these articles, the calculation of the technical provisions at the end of the year should not reflect the reduction of the adjustment related to that year. It is only on the first day of the following financial year that the adjustment should be made. For this reason the disclosed information reflects an event which might materially change the information to be disclosed on the first day of the following financial year.
The opinion clarifies that the SFCR, group SFCR or single SFCR should contain the necessary information to reflect the estimated impact in the technical provisions, Minimum Capital Requirement, Solvency Capital Requirement and Eligible Own Funds to cover the capital requirements, of the decrease of the portion of the adjustment performed on the first day of the next financial year. This information is required to comply with the principles of public disclosure and with Chapter XII of Title I of the Commission Delegated Regulation (EU) 2015/35. Only if the solvency position of the undertaking would be materially impacted by a recalculation of technical provisions in accordance with Article 291 of the Commission Delegated Regulation (EU) 2015/35 would this information be considered relevant.
A link to the opinion is here.