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European Insurance and Occupational Pensions Authority

772

Q&A

Question ID: 772

Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities

Article: 35

Template: S.12.01

Status: Final

Date of submission: 05 Aug 2016

Question

I have a question regarding following rows:
R0330 = Best estimate subject to volatility adjustment
R0340 = Technical provisions without volatility adjustment and without others transitional measures

I would lite to ask for a further explananation of these rows; I am not sure if I understand it properly.

1. R0330
I think this value is clear to me, so I just want to check my understanding is correct. R0300 includes the value of gross best estimate which is subject to the volatility adjustment. Value in R0300 is calculated with volatility adjustment. R0300 is therefore a part of a R0030. Am I correct?

2. R0340
LOG states: "Amount of technical provisions where the volatility adjustment has been applied calculated without volatility adjustment, for each LoB."
R0340 is the sum of:
i) amount of best estimate (exactly the value in R0330) where the VA has been applied, but for the purposes of this row, the volatility adjustment is disregarded.
ii) risk margin
I am concerned about the value of risk margin. Do you mean the risk margin that belongs to the total best estimate (per line of business, R0100)? What is the reason of inclusion of risk margin here? I thought that risk margin calculation is not affected by the use of volatility djustment.

3. Also please consider alligning the wording in the S.12.01 and S.17.01 regarding the R0340 and R0490 respectively. LOG for S.17.01 states:
R0490 = "Indicate the amount of Technical provisions without volatility adjustment, for each LoB." From the text I am not sure if the meaning is teh same as in the S.12.01 or not. I would say that in R0490 I should fill the gross TP (R0320) but without volatility adjustment applied during the calculation. But that is in contradiction with R0340 in S.12.01.

Would you be so kind and provide further claryfication?

EIOPA answer

The volatility adjustment may be applied to part of the business. Let’s say that gross BE is 100, as you say including VA. However, 30 corresponds to business for which VA was not applied and 70 to business to which VA applied.
-    In R0030, 100 is reported (gross BE)
-    In R0330, 70 is reported (R0330 is indeed a part of R0030)
-    In R0340 we understand that the drafting is not clear and the different drafting between S.12/S.17 raise doubts. However, we clarify that in both S.12 and S.17 what should be reported is the amount of Technical provisions without volatility adjustment” (using the example, 30 (amount to which VA is not applicable) + BE of contracts for which VA applied, before the application of VA (example assumes no other measures) + risk margin). This amount would correspond to the calculations as performed to assess the impact of LTGA (as reported in S.22.01, but by LoB).

Regarding the impact in the risk margin EIOPA confirms that the risk margin is not affected. See “Guideline 2 – Interaction of the long term guarantee measures with the risk margin calculation” of Guidelines on the implementation of the long-term guarantee measures.