On 16 December, EIOPA submitted its first annual report to the European Parliament on the Long-Term Guarantees Measures and Measures on Equity Risk contained in Solvency II. The report presents the use of these measures and their impact on the financial position of European insurers. The Solvency II Directive envisages, as part of its overall review, a series of similar reports until 2021.
The impact of the extrapolation of risk-fee interest rates, the transitional measure on technical provisions, the matching adjustment, the volatility adjustment, the extension of the recovery period in case of noncompliance with the Solvency Capital Requirement and the transitional measure on the risk-free interest rates is analysed in the report. At least one of the measures is being used by 901 insurance and reinsurance undertakings in 24 countries with a market share of 69%. The most used measure is the volatility adjustment.
The results of the report indicate that the measures are working as intended. For the insurers that participated in EIOPA's 2016 Insurance Stress Test if these measures were not applied own funds would be 107 billion lower and capital requirements 50 billion higher. The report concludes that the own funds and capital requirements of insurers are significantly impacted by the Long-Term Guarantees Measures.
A link to the report is here.