In context of the calculation of technical provisions, assumptions on the future returns of the assets can be relevant with respect to future discretionary benefits. According to the second sentence of Article 24 of Delegated Regulation 35/2015, those assumptions shall be consistent with the relevant risk-free interest rate term structure, including where applicable a matching adjustment, a volatility adjustment, or a transitional measure on the risk-free rate, and the valuation of the assets in accordance with Article 75 of Directive 2009/138/EC. Consequently, the volatility adjustment should be part of the relevant risk-free interest rate term structure used for discounting as well as for projecting asset returns in the context of future simulated reinvestments.

Note that this is commensurate with the requirement in Article 22(3)(c) of Delegated Regulation 35/2015, which sets out that, where insurance and reinsurance undertakings use a model to produce projections of future financial market parameters, the calibration of the parameters and scenarios must be consistent with the relevant risk-free interest rate term structure used to calculate the best estimate as referred to in Article 77(2) of Directive 2009/138/EC.

The calculation of the SCR in internal models, including where a dynamic volatility adjustment is used, follows those principles for the valuation of technical provisions. According to Art. 121(2) of Directive 2009/138/EC, the methods used to calculate the probability distribution forecast shall be based on adequate, applicable and relevant actuarial and statistical techniques and shall be consistent with the methods used to calculate technical provisions.