Assessment of a significant deviation as regards adjustments to the relevant risk-free rate and transitional measures

1. For the purposes of Article 37 (1)(d) of Directive 2009/138/EC, in concluding that the risk profile of an insurance or reinsurance undertaking deviates significantly from the assumptions underlying the matching adjustment referred to in Article 77b of that Directive, the volatility adjustment referred to in Article 77d of that Directive or the transitional measures referred to in Article 308c and 308d of that Directive, supervisory authorities shall take into account all relevant factors including all of the following:

(a) the nature, type and size of the deviation;

(b) the likelihood and severity of any adverse impact on policyholders and beneficiaries;

(c) the level of sensitivity of the assumptions to which the deviation relates;

(d) the anticipated duration and volatility of the deviation over the duration of the deviation;

(e) the impact of the deviation on the Solvency Capital Requirement and own funds of the undertaking.

2. With respect to the matching adjustment and transitional measures and with respect to the volatility adjustment, where Member States require prior approval for this adjustment, where supervisory authorities have allowed an insurance or reinsurance undertaking to use one of these adjustments or transitional measures, they may impose a capital add-on pursuant to Article 37 paragraph (1)(d) of Directive 2009/138/EC only in circumstances where the deviation from the assumptions underlying the adjustments or transitional measures is of a temporary nature and does not justify revoking the supervisory approval for the use of the adjustment or the transitional measure.