(39)

Article 77a is replaced by the following: ‘Article 77a Extrapolation of the relevant risk-free interest rate term structure 1. The determination of the relevant risk-free interest rate term structure referred to in Article 77(2) shall make use of, and be consistent with, information derived from relevant financial instruments. That determination shall take into account relevant financial instruments of those maturities where the markets for those financial instruments are deep, liquid and transparent. For maturities beyond the first smoothing point, the relevant risk-free interest rate shall be extrapolated in accordance with the third subparagraph. The first smoothing point for a currency shall be the longest maturity for which the following conditions are met: The extrapolated part of the relevant risk-free interest rate term structure shall be based on forward rates converging smoothly from the applicable forward rate at the first smoothing point to an ultimate forward rate (UFR). The extrapolated forward rate shall be equal to a weighted average of a liquid forward rate and the UFR. The liquid forward rate shall be based on one or a set of forward rates in relation to the longest maturities for which the relevant financial instrument can be observed in a deep, liquid and transparent market. For maturities of at least 40 years past the first smoothing point the weight of the UFR shall be at least 77,5 %. The extrapolated part of the relevant risk-free interest rates shall take into account information from financial instruments other than bonds where the markets for those financial instruments are deep, liquid and transparent. 2. Insurance and reinsurance undertakings may, subject to prior approval by their supervisory authority, apply the phasing-in mechanism set out in the second subparagraph. The phasing-in mechanism referred to in the first subparagraph shall consist of the following: The phasing-in mechanism referred to in the first subparagraph of this paragraph shall not affect the determination of the depth, liquidity and transparency of financial markets and the first smoothing point referred to in paragraph 1. Insurance and reinsurance undertakings applying the first and second subparagraphs of this paragraph shall within the part of their report on their solvency financial condition consisting of information targeted at market professionals referred to in Article 51(1b) publicly disclose: 3. Notwithstanding paragraph 1, on 28 January 2025, the first smoothing point for the euro, shall be at a maturity of 20 years.’ ; the markets for financial instruments of that maturity are deep, liquid and transparent; the percentage of outstanding bonds of that or a longer maturity among all outstanding bonds denominated in that currency is sufficiently high. on 30 January 2027, the parameters determining the speed of the convergence of the forward rates towards the ultimate forward rate of the extrapolation shall be set such that the risk-free interest rate term structure is sufficiently similar to the risk-free interest rate term structure on that date determined in line with the rules for the extrapolation applicable on 29 January 2027; the parameters determining the speed of the convergence of the forward rates towards the ultimate forward rate of the extrapolation shall be decreased linearly at the beginning of each calendar year, such that the final parameters of the extrapolation are applied as of 1 January 2032. the fact that they apply the phasing-in mechanism for extrapolation; and the quantification of the impact of not applying the phasing-in mechanism on their financial position.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-14 · Text as adopted (Official Journal); later amendments are not incorporated in this text.