Recital 45

(45) Directive 2009/138/EC provides for a volatility adjustment, which seeks to mitigate the effect of exaggerations of bond spreads and is based on reference portfolios for the relevant currencies of insurance and reinsurance undertakings and, in the case of the euro, on reference portfolios for national insurance markets. The use of a uniform volatility adjustment for entire currencies or countries can lead to benefits in excess of a mitigation of exaggerated bond spreads, in particular where the sensitivity of relevant assets of those insurance and reinsurance undertakings to changes in credit spreads is lower than the sensitivity of the relevant best estimate to changes in interest rates. In order to avoid such excessive benefits from the volatility adjustment, the volatility adjustment should be subject to supervisory approval and its calculation should take into account undertaking-specific characteristics related to the spread sensitivity of assets and the interest rate sensitivity of the best estimate of technical provisions. Moreover, minimum conditions for the use of the volatility adjustment should be introduced as an additional safeguard. Member States, some of which already subject the use of the volatility adjustment to a supervisory approval process, should have the option to extend the conditions for approval to include an assessment against the underlying assumptions of the volatility adjustment. In light of the additional safeguards, insurance and reinsurance undertakings should be allowed to add up to an increased proportion of 85 % of the risk-corrected spread derived from the representative portfolios to the basic risk-free interest rate term structure.

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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.