Question ID: 714
Regulation Reference: Risk-Free Interest Rate - Matching adjustment
Article: 77c, 53, 217
Status: Final
Date of submission: 20 Jul 2016
Question
For the purpose of calculation of MA [Article 77c(1)(a) of the Solvency II Directive] the undertaking shall only consider assets whose expected cash flows are required to replicate the liability cash flow [Article 53 of the Delegated Regulation].
In addition to value of these replicating assets, the total value of the technical provisions also include the value of the Risk Margin in relation to the policies where Matching Adjustment is applied and the value of max(CoD, 35%*LTAS – PD).
For the purpose of separate SCR calculation for matching adjustment portfolios [Article 217 of the Delegated Regulation], does the matching adjustment portfolio include the assets that cover the Risk Margin and the value of max(CoD, 35%*LTAS – PD)?
EIOPA answer
Insurers that apply the matching adjustment have to have an assigned portfolio of assets that is identified, organised and managed separately from other activities of the undertakings (Article 77b(1)(a) and (b) of the Solvency II Directive). Those are the assets that need to be considered in the separate SCR calculation for matching adjustment portfolios according to Article 217 of the Delegated Regulation. The assigned portfolio of assets needs to cover the best estimate, but it may include assets in excess of that.