Q&A

Question

When projecting the underwriting SCR through time, should the RFR curve be assumed to be static (i.e. the 10y rate in a year from now is equal to the 10y rate today) or should the RFR curve evolve according the forwards? Also, should the curve used to project the underwriting SCR include the UFR?

EIOPA answer

For the purpose of the risk margin calculation - as specified in Article 37 of the Delegated Regulation - when projecting the SCR through time, the information to be used should stem from the RFR curve. No alteration of the curve should be made. Nevertheless, the rates used should of course evolve according to the forwards.

EIOPA publishes monthly the Risk-Free Interest Rate Term Structures to be used for such purpose that can be found here : https://www.eiopa.europa.eu/tools-and-data/risk-free-interest-rate-term-structures-0_en. Those curves are built upon a methodology that relies on the definition of an Ultimate Forward Rate.