Commission Delegated Regulation (EU) 2026/269 of 29 October 2025 amending Delegated Regulation (EU) 2015/35 as regards technical provisions, long-term guarantee measures, own funds, equity risk, spread risk on securitisation positions, other standard formula capital requirements, reporting and disclosure, proportionality and group solvency

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	2026/269	18.2.2026

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) [^ntr1-L_202600269EN.000101-E0001], and in particular Article 29(5), Article 31(4), Article 35(9), Article 37(6), Article 50(1), Article 56, Article 75(2), Article 75(3), Article 86(1), Article 92(1a), Article 97(1), Article 99, point (b), Article 105a(5), Article 111(1), Article 127, Article 130, Article 213a(6), Article 233b, point (a), Article 234, Article 256(4), and Article 256b(6), thereof,

Whereas:

• (1) With around EUR 10 trillion of assets under management, insurance and reinsurance undertakings are a mainstay of the financial system. In view of the long-term nature of their business, they are particularly well-placed to provide stable funding to the real economy, including small and medium-sized enterprises (SMEs). Due to their pivotal socio-economic role, insurance and reinsurance undertakings are subject to comprehensive prudential rules, set out in Directive 2009/138/EC and Commission Delegated Regulation (EU) 2015/35 [^ntr2-L_202600269EN.000101-E0002].

• (2) To enhance the ability of the sector to support the real economy, the green and digital transitions, and other Union priorities, while preserving prudential soundness and financial stability, Directive 2009/138/EC was amended by Directive (EU) 2025/2 of the European Parliament and of the Council [^ntr3-L_202600269EN.000101-E0003] which entered into force on 28 January 2025. Directive (EU) 2025/2 improves the design of long-term guarantee measures and introduces a preferential treatment for long-term investments in equity. Those amendments will increase undertakings’ available capital in excess of the Solvency Capital Requirement, and thereby strengthen their capacity to support the objectives of the Savings and Investments Union and the European Green Deal. Directive (EU) 2025/2 also enhances proportionality of prudential rules, by introducing a new category of ‘small and non-complex undertakings’ which can automatically benefit from identified proportionality measures on reporting, disclosure, governance, revision of written policies, calculation of technical provisions, own-risk and solvency assessment, and liquidity risk management plans. At the same time, recognising the need to maintain a robust supervisory framework, Directive (EU) 2025/2 strengthens cooperation requirements between supervisory authorities, enhances the coordination role and the supervisory powers of the European Insurance and Occupational Pensions Authority (EIOPA), and expands the macroprudential toolkit available to national supervisory authorities.

• (3) To become fully operational, the new regime requires further specifications of key quantitative parameters in delegated acts. Therefore, Delegated Regulation (EU) 2015/35 should be amended. The amendments to Delegated Regulation (EU) 2015/35 should contribute to the implementation of the Unions’ policy agenda on the Savings and Investments Union, and should help insurers enhance the competitiveness of the economy of the Union, as outlined in the Commission’s Competitiveness Compass [^ntr4-L_202600269EN.000101-E0004]. In particular, the potential of insurers to mobilise additional private capital in support of key Union objectives, including when investing together with public funds in the real economy, in particular through significant public guarantees or subsidies, should be recognised.

• (4) Current prudential calibrations ensure a high level of policyholder protection and contribute significantly to financial stability. However, those calibrations can also be overly conservative, limiting insurers’ capacity to engage in long-term investments. To address that issue, the prudential framework should be revised to remove unjustified layers of prudence. While such revisions may result in higher own funds in excess of the solvency capital requirements, insurance and reinsurance undertakings are expected to support the Union’s broader policy objectives, by directing additional capital towards productive investments in the real economy.

• (5) The Union faces massive financing needs to deliver on its already-agreed objectives on innovation, sustainable growth and defence [^ntr5-L_202600269EN.000101-E0005]. Directive (EU) 2025/2 has amended Directive 2009/138/EC, inter alia to ensure that the level of available capital in excess of the Solvency Capital Requirement is increased. It is important that national supervisory authorities and EIOPA monitor the use of that newly available capital considering the impact on the capital position of insurers over time. Expectations are that insurers direct excess capital to productive investments, including securitisation positions, that contribute to the funding of companies and the economy of the Union. The Commission will monitor whether such expectations are fulfilled and will assess the effectiveness of the reforms in particular as regards their impact on increasing the insurance sector participation in productive investments contributing to the funding of companies and the economy of the Union. In this context, EIOPA should regularly report to the European Commission, the European Parliament and the Council on (i) the allocation of assets, broken down by sector and geographical area; (ii) increases in distributions to shareholders, including share buy-backs, as well as variable remuneration to the administrative, management or supervisory body, key function holders or senior management, taking into account the newly available capital in excess of the Solvency Capital Requirement stemming from Directive (EU) 2025/2 and from this Regulation. The first report should be submitted by 31 December 2028.

• (6) The Commission, together with EIOPA, will assess how sustainability risks related to fossil fuel assets and activities, including transition risks currently associated with high emissions but on a trajectory towards alignment with the Paris Agreement objectives, are managed by insurance and reinsurance undertakings. Where appropriate, the Commission will consider possible amendments to ensure that these emerging risks are adequately reflected in the prudential framework, taking into account developments in the framework for credit institutions, and the report delivered by EIOPA pursuant to Article 304c(1) of Directive 2009/138/EC. The Commission will also consider, as part of the forthcoming European Climate Adaptation Plan, whether prudential rules can be more conducive to issuances of or investments in catastrophe bonds and other green bonds.

• (7) The requirement to obtain two credit assessments from nominated external credit assessment institutions (ECAIs) is in general justified by the complexity of assessing in a reliable manner the credit risk of securitisation positions. However, securitisations meeting the criteria of simplicity, transparency and standardisation (STS) are subject to a specific regulatory framework designed to ensure comparability and to reduce information asymmetries. For that reason, and to support the Union’s efforts to address unjustified administrative and compliance costs, it is appropriate to lift the double-rating requirement for STS securitisations, while maintaining it for other securitisations.

• (8) Climate change related risks are long-term in nature, non-linear and systemic, making them challenging for insurance and reinsurance undertakings to estimate solely based on past data. Directive (EU) 2025/2 introduced new requirements on the management of climate change related risks and sustainability risks more generally. In particular, Article 45a of Directive 2009/138/EC as amended by Directive (EU) 2025/2 requires undertakings to identify any material exposure to climate change risks and, where relevant, to assess the impact of long-term climate change scenarios on their business. However, when it comes to the valuation or computation of capital requirements with an internal model, insurance and reinsurance undertaking often use data from past events to inform predictions on risks materialising in the future. Data from past events may not sufficiently capture climate change related trends. Forward looking assessments, including plausible climate scenarios, may therefore be necessary to assess how the risks evolve and to mitigate possible impacts. Where an insurance or reinsurance undertaking relies too heavily on past data, its best estimate for obligations to policy holders or its internal model, where applied, may underestimate obligations or relevant risks. It is therefore necessary to require undertakings to have in place internal procedures to avoid overreliance on data from past events in relation to climate-change related trends.

• (9) The risk margin is currently calibrated conservatively. Directive (EU) 2025/2 reduces the cost-of-capital rate underlying the risk margin calculation, leading to an overall reduction in its level by approximately 21 %. Despite that amendment, the calculation formula set out in Delegated Regulation (EU) 2015/35 does not adequately reflect the natural decline of certain risks over time and may result in the double counting of such risks, including lapse and mortality. It is therefore necessary to introduce an exponential and time-dependent factor, which ensures an annual reduction of risks of at least 3,5 %. That adjustment is intended to correct the conservative bias in the current calibration, thereby reducing technical provisions of insurance and reinsurance undertakings, and, as a result, increasing the capital available to cover the Solvency Capital Requirement. However, to ensure that the risk margin continues to reflect an appropriate level of prudence and does not compromise policyholder protection, the reduction in the quantification of future risks resulting from that factor should be capped at 50 %.

• (10) Directive (EU) 2025/2 amended the method for the extrapolation of risk-free interest rates. In particular, that Directive changed the approach for identifying the starting maturity of extrapolation (‘first smoothing point’). Article 77a(1) of Directive 2009/138/EC provides that the first smoothing point should correspond to a maturity for which the volume of outstanding bonds of that or a longer maturity is sufficiently high. Article 77a(3) of that Directive further specifies that the first smoothing point for the euro should be at a maturity of 20 years on 28 January 2025. Currently, the percentage threshold for determining a sufficient volume of bonds is set at 6 % for the euro. However, due to the increase in outstanding long-maturity bonds in recent years, that threshold may no longer point to a 20-year first smoothing point going forward. In addition, EIOPA will need to decide which data source it will use for that assessment, including the publication of information pursuant to Article 77e(1a) of Directive 2009/138/EC. To avoid market disruption, it is important that the percentage threshold is in such a way that it also results in a first smoothing point of 20 years at the application date of Directive (EU) 2025/2, regardless of the data source used by EIOPA. Therefore, the currency-related threshold used for the euro to assess whether the percentage of outstanding bonds with maturities equal to or greater than the first smoothing point referred to in Article 77a of Directive 2009/138/EC is sufficiently high, should be calculated as follows. A ‘safety margin’ of 1,5 % should be applied to the minimum percentage that results in a 20-year first smoothing point on 28 January 2025, based on the data source that EIOPA will use at the application date of new rules. The obtained percentage should be rounded up to the closest half-integer or integer percentage.

• (11) The extrapolated forward rate should be equal to a weighted average between a liquid forward rate and the ultimate forward rate (UFR). Article 77a(1) of Directive 2009/138/EC provides that for maturities of at least 40 years past the first smoothing point, the weight of the UFR should be at least 77,5 %. That implies that the parameter determining the speed of the convergence of the forward rates towards the UFR of the extrapolation should not be lower than 11 %. Therefore, such value should be used. However, due to the specificities of the Swedish bond market, and as explained by EIOPA in its Opinion on the Solvency II review [^ntr6-L_202600269EN.000101-E0006], the use of such a value for the Swedish krona, would result in a significant and unintended distortion of the risk-free interest rate term structure. To preserve the integrity of the risk-free interest term structure, a convergence parameter of 40 % should apply for that currency.

• (12) Directive (EU) 2025/2 amended the rules governing the volatility adjustment by requiring that the volatility adjustment is subject to supervisory approval and by requiring that its calculation takes into account undertaking-specific characteristics related to the spread sensitivity of assets and the interest rate sensitivity of the best estimate of technical provisions. In addition, the volatility adjustment is not to reflect the portion of the spreads that is attributable to a realistic assessment of expected losses or unexpected credit or other risk. Article 77d(3) of Directive 2009/138/EC as amended by Directive (EU) 2025/2 provides that such portion is to be calculated as percentage of the spreads, and is to decrease as spreads increase. Empirical economic studies confirm that for corporate bonds, the major part of spreads reflect genuine credit risk, in particular where spreads are at low-to-medium levels. Therefore, where spreads on corporate bonds and loans do not exceed their long-term average, the percentage applied to determine the risk correction should not be lower than 50 %.

• (13) To ensure the volatility adjustment operates in a countercyclical manner, the risk correction should not exceed an appropriate share of long-term average spreads. Where that percentage is too low, the volatility adjustment could unduly neutralise an increase in spreads stemming from genuine deterioration of the credit worthiness of bond issuers, thereby overstating the solvency position of insurance or reinsurance undertakings during periods of short-term market stress. Therefore, to ensure that the volatility adjustment effectively stabilises the solvency position of insurance or reinsurance undertakings without distorting risk sensitivity, the maximum level of the risk correction should not be set too low.

• (14) Article 70(1) Delegated Regulation (EU) 2015/35 provides that when calculating their available own funds, insurance and reinsurance undertakings are to deduct foreseeable dividends, distribution and charges from the excess of assets over liabilities. However, Delegated Regulation (EU) 2015/35 does not specify how the deduction should be made. In particular, while certain undertakings progressively accrue foreseeable dividends during the financial year, others immediately deduct the full amount of yearly foreseeable dividends. To ensure a level-playing field, insurers should use an accrual approach when determining the amount of foreseeable dividends to be deducted when calculating their available own funds.

• (15) Article 69, point (a)(i), of Delegated Regulation (EU) 2015/35 provides that paid-in ordinary shares capital and the related share premium account are eligible as tier 1 basic own-fund items where their repayment or redemption is subject to prior supervisory approval. Such a requirement may create undue administrative and regulatory burden where an insurance or reinsurance undertaking executes a share buy-back programme with the objective of immediately using the bought shares for the exercise stock options. It should therefore be specified that where the repayment or redemption of basic own fund items aims at exercising stock option rights within no more than one month from the date of the share buyback, such repayment or redemption should not be subject to prior supervisory approval.

• (16) Pursuant to Article 77b(1), point (b), of Directive 2009/138/EC, insurance and reinsurance undertakings that use the matching adjustment have to identify, organise and manage the assigned portfolio of assets and obligations separately from other parts of the business and are therefore not permitted to meet risks arising elsewhere in the business using the assigned portfolio of assets. However, the separated management of the portfolio does not result in an increase in correlation between the risks within that portfolio and those within the rest of the undertaking. Therefore, insurance and reinsurance undertakings which use the matching adjustment should not be required to calculate a distinct notional solvency capital requirement for the portfolio of assets and obligations to which the matching adjustment is applied, unless the portfolios of assets covering a corresponding best estimate of insurance or reinsurance obligations form a ring-fenced fund.

• (17) Article 84(4) of Delegated Regulation (EU) 2015/35 provides that the ‘look-through’ approach should apply to related undertakings that mainly act as investment vehicles on behalf of the participating insurance or reinsurance undertaking. However, that wording may unduly exclude related undertakings that manage assets on behalf of several undertakings within the same insurance or reinsurance group. That creates a regulatory gap and risks inconsistent application of the ‘look-through’ principle. Article 84(4) of Delegated Regulation (EU) 2015/35 should therefore be amended to specify that the ‘look-through’ approach also applies where the related investment vehicle manages assets on behalf of multiple undertakings within the group, and not only on behalf of the participating undertaking itself.

• (18) Rules governing the calculation of the counterparty default risk module, including the risk-mitigating effect of derivatives, reinsurance arrangements or insurance securitisation can prove to be very complex. Such complex calculations may not always be commensurate to the nature, scale, and complexity of the risks of an insurance or reinsurance undertaking. Therefore, to reduce compliance costs for smaller undertakings, an additional simplified calculation of the risk-mitigating effect of derivatives, reinsurance arrangements or securitisation should be introduced.

• (19) Insurance and reinsurance undertakings may opt to transfer risks using non-proportional reinsurance arrangements. However, where the standard formula is used, such type of reinsurance arrangement is not appropriately reflected as a risk-mitigation technique to reduce the Solvency Capital Requirements. It is therefore necessary to lay down that certain forms of reinsurance, in particular adverse development covers allowing to transfer reserve risk, can be recognised in a simple manner under the standard formula.

• (20) Article 164(3) of Delegated Regulation (EU) 2015/35 provides that the correlation between standard formula spread risk and interest rate risk in the interest rate downward scenario is 50 %. However, economic analysis conducted by the European Insurance and Occupational Pensions Authority (‘EIOPA’) demonstrates that such calibration is overly conservative [^ntr7-L_202600269EN.000101-E0007]. In particular, empirical data shows that the largest interest rate decreases did not occur at the same time as the largest spread widening in bond markets. Therefore, the correlation between spread risk and interest rate risk in the interest rate downward scenario should be decreased to 25 %.

• (21) Capital requirements for interest rate risk under the standard formula are calculated separately for each currency. However, for insurance and reinsurance undertakings the head office of which is in a Member State whose local currency is pegged to the euro, that approach results in disproportionately high capital requirements that do not reflect the actual economic risks. It is therefore necessary to lay down that capital requirement for interest rate risk under the standard formula may be calculated jointly for the euro and the pegged currency of the Member state in which insurance or reinsurance undertakings have their head office.

• (22) The extrapolation method used to value long-term liabilities contributes to smoothening the effect of changes in interest rates on the best estimate of insurance liabilities. The current standard formula capital requirements to interest rate risk do, however, not reflect the extrapolation of long-term interest rates. It is therefore necessary to require that stressed interest rates at maturities beyond the first smoothing point are extrapolated.

• (23) Under current rules, the standard formula interest rate risk assumes that positive interest rates cannot become negative and that negative interest rates cannot decrease further. However, historical developments in financial markets showed that such assumption may significantly underestimate exposures to interest rate risk by insurance or reinsurance undertakings. Therefore, the standard formula should be amended to appropriately reflect the risk of low or negative interest rates. That should be achieved via a recalibration of the interest rate risk sub-module to reflect the existence of a negative yield environment.

• (24) Amendments to standard formula for interest rate risk should not result in unjustified increase in capital requirements when rates are low. In particular, the calibration of downward shock should not assume interest rate levels to fall significantly below historically observed values across major currencies. Therefore, to ensure proportionality and consistency with past market behaviours, a maturity-dependent floor should be introduced to limit the extent of assumed negative interest rates, increasing with maturity to reflect the lower plausibility of extreme long-term rates.

• (25) As underlined in the Commission’s Communication on a Savings and Investment Union [^ntr8-L_202600269EN.000101-E0008], institutional investors, such as insurance and reinsurance undertakings, are uniquely placed to invest with a long-term perspective and support the equitisation of Union firms in priority areas, including defence, research and innovation or the green and digital transitions. Encouraging equity financing is central to strengthening the Union’s economic resilience and competitiveness, notably by enabling innovative firms to access stable and patient capital. Article 105a of Directive 2009/138/EC lays down a preferential capital requirement applicable to long-term equity investments. Specifically, paragraph 1, point (d), of that Article provides that, to benefit from the preferential treatment, insurance and reinsurance undertakings should demonstrate, to the satisfaction of the supervisory authorities, that they are able to avoid forced sales of equity investments for a period of five years, on an ongoing basis and under stressed conditions. To ensure that this requirement is applied in a consistent manner, the approaches to demonstrate an undertaking’s ability to avoid forced sales of equity investments should be specified. In addition, to avoid unjustified administrative burden and to accommodate differences in the complexity of undertakings’ risk profiles, insurance and reinsurance undertakings should be allowed to select the most appropriate approach from several methods, depending on their business model and sophistication. That can increase the usability and effectiveness of the preferential treatment across diverse categories of undertakings. However, to prevent arbitrary or opportunistic switching between approaches over time, it is necessary to set out clear safeguards and supervisory monitoring requirements, ensuring consistency, transparency, and supervisory convergence, while maintaining prudent risk management and policyholder protection.

• (26) By default, where long-term equity investments are made through collective investment undertakings, the criteria set out in Article 105a(1) of Directive 2009/138/EC should be assessed at the level of each underlying asset. However, Article 105a(2) of that Directive provides that, for certain types of collective investment undertakings presenting a lower risk profile, those criteria set out in Article 105a(1) of that Directive may be assessed at the level of the fund rather than at the level of the underlying assets held within that fund. Article 168(6) of Delegated Regulation (EU) 2015/35 already identifies certain collective investment undertakings as type 1 equities, which are subject to lower risk factors for equity risk than type 2 equities. These include European Social Entrepreneurship Funds, European Venture Capital Funds, European Long-Term Investment Funds, and closed-ended alternative investment funds with no leverage. As for closed-ended alternative investment funds with no leverage, the use of derivative instruments for hedging purposes, as well as temporary borrowing arrangements that are fully covered by contractual capital commitments from investors in the alternative investment fund, are excluded from the leverage calculation. All such type 1 funds should also be considered as presenting a lower risk profile for the purposes of identifying long-term equity investments, including when they are invested in qualifying infrastructure equities or qualifying infrastructure corporate equities. Where the conditions set out in Article 105a(1) of Directive 2009/138/EC are met at the level of such funds with lower risk profile, the preferential 22 % risk factor referred to in paragraph 4 of Article 105a of that Directive should by default only apply to the equity exposures held within such funds, and not to other financial assets.

• (27) The current limits on the symmetric adjustment reduce its effectiveness in mitigating the potential pro-cyclical effects of the financial system. In particular, they may lead insurance and reinsurance undertakings to raise additional capital or sell assets in response to short-lived adverse market movements, including those triggered by geopolitical instability. In line with Directive (EU) 2025/2, Article 172 of Delegated Regulation (EU) 2015/35 should be amended to allow the symmetric adjustment to generate greater variations in the standard equity capital charge, thereby enhancing its capacity to dampen the impact of sharp market fluctuations.

• (28) In the banking sector, Article 133(5) Regulation (EU) No 575/2013 of the European Parliament and of the Council [^ntr9-L_202600269EN.000101-E0009] allows credit institutions, under certain conditions and subject to prior supervisory approval, to apply a preferential risk weight to equity exposures acquired under specific legislative programmes. Those programmes should provide significant subsidies or guarantees, involve government oversight and impose some restrictions on the types of equity investments. To foster a cross-sectoral level playing field and to strengthen the contribution of insurance and reinsurance undertakings to equity financing of the real economy, it is appropriate to replicate the approach in the standard formula for calculating the Solvency Capital Requirements under Delegated Regulation (EU) 2015/35. Equity investments made under comparable legislative programmes, including those which support one or more economic sectors listed in the Communication on the Competitiveness Compass for the Union or in the ReArm Europe plan/Readiness 2030 [^ntr10-L_202600269EN.000101-E0010], should be recognised as having the potential to reduce risk and may therefore justify a lower capital requirement, subject to the approval of the supervisory authority.

• (29) To ensure consistency between banking and insurance regulations, and to promote convergence in supervisory practices, legislative programmes deemed to meet the eligibility conditions under Article 133(5) of Regulation (EU) No 575/2013 should also be recognised as legislative programmes under Delegated Regulation (EU) 2015/35, based on the same criteria. The Commission may maintain a public register of such programmes for the purposes of Article 133(5) of Regulation (EU) No 575/2013, thereby enhancing transparency and predictability. Where such a register exists, the inclusion of a programme therein should constitute a presumption that such programme qualifies under the insurance framework as well.

• (30) Investments made under legislative programmes may also qualify as long-term equity investments. Therefore, it is necessary that the calculation of solvency Capital Requirements allow reflecting the combined risk-reducing features of both types of investments.

• (31) A well-functioning securitisation market provides additional funding sources to capital markets, thus improving the funding capacity of the real economy and contributing to delivering on the Savings and Investments Union. It also provides alternative investment opportunities to insurance and reinsurance undertakings, which need to diversify their portfolios to boost returns and reduce idiosyncratic risk. As institutional investors, insurance and reinsurance undertakings should therefore be fully integrated into the Union’s securitisation market.

• (32) Commission Delegated Regulation (EU) 2018/1221 [^ntr11-L_202600269EN.000101-E0011] introduced into Delegated Regulation (EU) 2015/35 specific risk factors for spread risk of STS securitisations. However, the risk factors for senior tranches of STS securitisations remained above those applicable to corporate bonds or covered bonds with the same credit quality step. However, contrary to corporate or covered bonds, STS securitisations with a comparable credit quality are subject to specific due diligence and transparency requirements under Regulation (EU) 2017/2402 of the European Parliament and of the Council [^ntr12-L_202600269EN.000101-E0012]. Those requirements ensure that insurance or reinsurance undertakings have a better understanding and management of the risks related to STS securitisations. Therefore, to improve consistency across asset classes with comparable risk profiles, risk factors for senior tranches of STS securitisations should be further aligned with those applicable to corporate or covered bonds.

• (33) Delegated Regulation (EU) 2015/35 does not distinguish between senior tranches and non-senior tranches of non-STS securitisations. That lack of risk-sensitivity results in overestimating the spread risks underlying investments in the highest-quality tranches of non-STS securitisation. In addition, the difference in capital requirements for insurance or reinsurance undertakings between STS and non-STS securitisations is much more significant than that applicable to credit institutions. Therefore, to preserve that difference, lower risk factors should be introduced for senior tranches of non-STS securitisations.

• (34) The amounts expressed in euro in Delegated Regulation (EU) 2015/35 have not been revised since its entry into force in 2014. The cumulative inflation since then is approaching 35 %. Therefore, the amounts expressed in euro in that Regulation should be revised, by increasing the base amount in euro by the percentage change in the Harmonised Indices of Consumer Prices of all Member States as published by the Commission (Eurostat).

• (35) Article 192(4) of Delegated Regulation (EU) 2015/35 provides that where the loan-to-value on a mortgage loan does not exceed 60 %, the standard formula capital requirement for counterparty default risk is null. That treatment unduly underestimates the actual risks of such exposures, and results in an uneven playing field with the banking sector where such exposures are risk weighted. Therefore, a floor to the loss-given default on mortgage loans should be introduced.

• (36) Article 176(4) of Delegated Regulation (EU) 2015/35 sets out the risk factors applicable to loans for which a credit assessment by a nominated External Credit Assessment Institutions (ECAI) is not available and for which debtors have not posted collateral that meet the criteria set out in Article 214 of that Regulation. However, those applicable risk factors substantially underestimate the level of potential losses on default of forborne loans. It is therefore necessary to adapt those risk factors to better reflect the level of potential losses on default of forborne loans.

• (37) Central clearing counterparties (CCPs) have developed new access models which enable insurance or reinsurance undertakings to become direct clearing members while a sponsor undertaking is responsible for default fund contributions. To date, no insurance or reinsurance undertaking has decided to use those new access models. That is partly due to the prudential treatment of direct exposures to qualifying CCPs, which can be higher than the prudential treatment applicable to an insurance or reinsurance undertaking which acts as an indirect clearing member. Delegated Regulation (EU) 2015/35 does not fully reflect the risk-reducing effect of central clearing for insurance or reinsurance undertakings. To address that issue and to remove obstacles to the participation of insurance or reinsurance undertakings as direct clearing members, capital requirements for direct exposures to qualifying CCP should be lowered and aligned with those of indirect exposures.

• (38) Insurance and reinsurance undertakings may decide to use repurchase transactions, or securities lending or borrowing transactions, to manage liquidity or to increase asset returns. However, the capital requirements associated with such transactions are currently treated too conservatively, as they are classified as type 2 exposures for the calculation of capital requirements under the counterparty default risk module. Therefore, Delegated Regulation (EU) 2015/35 should be amended to reclassify those transactions as type 1 exposures. In addition, the Commission will assess, in coordination with EIOPA, whether and how to reflect in capital requirements for counterparty default risk the risk-mitigating effect of central clearing through qualifying CCPs.

• (39) In some cases, insurance and reinsurance undertakings can significantly reduce their Solvency Capital Requirement by using risk mitigation techniques, including reinsurance, but those risk mitigation techniques do not always result in a significant transfer of risk. In particular, some reinsurance agreements are designed to cover only the extreme scenarios modelled in the standard formula, while offering little or no protection against more moderate but more likely events. Therefore, to ensure that the risk profile of insurance and reinsurance undertakings is more accurately assessed, it should be specified that the reduction in the Solvency Capital Requirement resulting from the use of risk mitigation techniques is to be commensurate with the amount of risks effectively transferred.

• (40) To ensure that risk-mitigation techniques that are recognised in the standard formula calculation of the Solvency Capital Requirement do not include material basis risk, insurance and reinsurance undertakings should assess the effective performance of the risk mitigation under a comprehensive set of risk scenarios that are relevant for the risk-mitigation technique considered. For proportional reinsurance, effective performance should be shown by a close mirroring in all scenarios. For non-proportional reinsurance, the assessment should focus on scenarios featuring losses between attachment and detachment points and should observe a close mirroring of those losses.

• (41) Article 275(2), point (c), of Delegated Regulation provides that the payment of a substantial portion of the variable remuneration component to staff whose professional activities have a material impact on the undertaking’s risk profile should be subject to deferral. However, the cost of applying such a requirement may exceed its prudential benefits in cases where a member of that category of staff has a low level of variable remuneration, as such remuneration levels are unlikely to create incentives for excessive risk-taking. Therefore, in such cases, the requirement on deferral set out in Article 275(2), point (c), of Delegated Regulation should not apply.

• (42) Directive 2009/138/EC requires the regular disclosure of essential information through the solvency and financial condition report. That report is targeted at policy holders and beneficiaries on the one hand, and analysts and other market professionals on the other hand. To address the needs and the expectations of those two different groups, Directive (EU) 2025/2 amending Directive 2009/138/EC requires that the content of the report should be divided into two parts, clearly identified but disclosed jointly. The first part, addressed mainly to policy holders and beneficiaries, should contain the key information on business, performance, capital management and risk profile. The second part, addressed to market professionals, should contain detailed information on the business and on the system of governance, specific information on technical provisions and other liabilities, the solvency position as well as other data relevant for specialised analysts. Therefore, Delegated Regulation (EU) 2015/35 should be amended to reflect that new structure and content.

• (43) Certain information to be included in the part of the solvency and financial condition report targeted at market professionals may already be publicly available in other reports published by insurance or reinsurance undertakings. Where that is the case, insurance and reinsurance undertakings should not be required to duplicate that information in their solvency and financial condition report, but should instead be allowed to provide direct references, including through internet links, to the relevant section or page of the other report. To ensure accessibility over time, insurance or reinsurance undertakings should ensure that such links remain functional for a minimum of five years, even where website structures or document locations change.

• (44) The part of the solvency and financial condition report targeted at policy holders and beneficiaries should be concise, accessible and easily understandable by a layperson. To achieve that objective, it should only contain simple information focused on the needs of targeted policy holders and beneficiaries, and it should not exceed five pages in length.

• (45) To ensure that policy holders and beneficiaries can understand the part of the solvency and financial condition report targeted at them, that part should be made available in the languages used by the insurance or reinsurance undertaking in its operations under the freedom of establishment or the freedom to provide services. However, to avoid excessive administrative and legal costs, undertakings should not be required to obtain certified translations of that part.

• (46) Pursuant to Directive 2009/138/EC, supervisory authorities are entitled to receive from each supervised insurance and reinsurance undertaking and their groups, at least every three years, a regular narrative report with information on the business and performance, system of governance, risk profile, capital management and other relevant information for solvency purposes. The requirements regarding narrative information to be included in the regular supervisory report may however overlap with information already provided in quantitative reporting templates or in the Own Risk and Solvency Assessment (ORSA) report. That duplication increases reporting costs without clear added value for supervision. The requirements for narrative information to be included in the regular supervisory report should therefore be limited to what is necessary for prudential supervision.

• (47) As part of its efforts to make the economy of the Union more competitive, the Commission aims to deliver an unprecedented simplification effort. Against that background, the review of Delegated Regulation (EU) 2015/35 should aim to achieve the objectives of Directive (EU) 2025/2 in the simplest, most targeted, most effective and least burdensome way. In particular, amendments to that Regulation should contribute to the targets for burden reduction, including reporting burden.

• (48) Article 330(4) of Delegated Regulation (EU) 2015/35 provides that any minority interest in a subsidiary exceeding the contribution of that subsidiary to the group Solvency Capital Requirement, where the subsidiary is an insurance or reinsurance undertaking, a third country insurance or reinsurance undertaking, an insurance holding company or a mixed financial holding company, should be considered unavailable. Actually, minority interests represent one of the main sources of deductions from group own funds. However, that Delegated Regulation does not set out how such minority interests should be calculated. That results in inconsistent approaches by groups across the Union and raises level playing field issues. It is therefore necessary to lay down rules governing the calculation of minority interests for solvency purposes.

• (49) Insurance prudential rules can prove to be very complex, and may generate significant compliance costs, in particular for smaller undertakings. While Directive 2009/138/EC embeds an overarching principle of proportionality, its practical implementation is insufficient to effectively reduce the regulatory burden for smaller undertakings, for whom certain requirements may be disproportionately costly and complex given the nature, scale and complexity of their risks. In addition to the new proportionality framework applicable for undertakings classified as small and non-complex, Directive (EU) 2025/2 introduced Article 29d into Directive 2009/138/EC, allowing insurance and reinsurance undertakings to benefit from the application of proportionality measures, subject to prior supervisory approval and a case-by-case analysis. To ensure a level-playing field and predictability for the sector, the conditions based on which a supervisory authority may refuse to grant that approval should be exhaustively specified.

• (50) Directive (EU) 2025/2 introduced several changes and clarifications to the rules governing the calculation of the solvency position of insurance groups, including with regard to own funds and solvency capital requirements. In particular, it clarifies that insurance holding companies and mixed financial holding companies are to be treated as insurance or reinsurance undertakings for the sole purposes of group solvency calculations. That entails the calculation of notional capital requirements for such entities under both method 1, including in the context of the assessment of the availability of own funds, and method 2. Delegated Regulation (EU) 2015/35 should therefore be amended to reflect those changes to Directive 2009/138/EC.

• (51) For own fund items issued by a related undertaking to qualify as group own funds, they are to satisfy the requirements set out in Articles 71, 73, and 77 of Delegated Regulation (EU) 2015/35, with the reference to the ‘Solvency Capital Requirement’ in those Articles interpreted as applying to both the Solvency Capital Requirement of the issuing related undertaking and the group Solvency Capital Requirement. In the context of mergers and acquisitions, that requirement may prevent recognition of own fund instruments issued by an undertaking before it became part of the acquiring group, even where those instruments continue to meet all relevant prudential standards at the level of the undertaking itself. Such a limitation can create disproportionate capital costs associated with external growth, ultimately impairing the international competitiveness of Union insurance and reinsurance groups. To address that issue, it should be allowed, on a transitional and time-limited basis, to recognise such own fund items as non-available group own funds following the acquisition of the issuing undertaking.

• (52) While prudential consolidation serves different objectives than accounting consolidation, excessive divergence between the two frameworks may impose an undue regulatory burden on insurance and reinsurance groups. In particular, the current treatment of joint operations and joint ventures under Delegated Regulation (EU) 2015/35 deviates from international accounting standards by requiring proportional consolidation of undertakings that would otherwise be treated under the equity method, and conversely requiring the application of an equity method for undertakings that would otherwise be subject to proportional consolidation. That inconsistency increases reporting costs, creates operational inefficiencies, and may discourage legitimate business structures. Greater consistency with international accounting consolidation rules in the treatment of joint arrangements should therefore be achieved, provided that such alignment does not compromise policy holder protection or financial stability.

• (53) For an equity portfolio to be treated as long-term equity, insurance or reinsurance undertakings are to demonstrate that they fulfil the conditions set out in Article 105a(1) of Directive 2009/138/EC. Where such an undertaking belongs to a group, it would be too burdensome for that group to reassess the conditions for long-term equity at group level. Therefore, unless there are significant group-wide liquidity risks not captured at the level of individual undertakings or significant intragroup transactions, equity investments which are treated as long-term equities by an insurance or reinsurance undertaking should also be treated as such when calculating the solvency capital requirement of the group to which that undertaking belongs.

• (54) Directive 2009/138/EC provides for the possibility for insurance and reinsurance groups to calculate their Solvency Capital Requirement with a full or partial internal model subject to prior supervisory approval. Any integration technique of a partial internal model into the standard formula to calculate the group Solvency Capital Requirement is part of that internal model and is to, together with the other components of the partial internal model, to comply with the relevant requirements of Directive 2009/138/EC. The integration techniques set out in Annex XVIII to Delegated Regulation (EU) 2015/35 are primarily designed for the integration of risks and not for the integration of entire undertakings within an internal model at group level. Therefore, it should be specified that in cases where undertakings are integrated as a whole, Article 239(4) of that Regulation applies.

• (55) Delegated Regulation (EU) 2015/35 does not specify under which conditions the use of ‘method 2’, as referred to in Article 233 of Directive 2009/138/EC, is to take precedence over integration techniques. To address that gap, insurance and reinsurance groups should demonstrate the appropriateness of the integration techniques they apply and should justify to the satisfaction of their supervisory authority why those integration techniques are more suitable than the application of method 2.

• (56) Natural disasters and extreme weather events are increasing across the world due to climate change, and so are the losses related to them. To ensure the continued protection of policy holders and the overall stability of the Union insurance sector amid more erratic and damaging weather patterns, it is important that insurers’ capital requirements for natural catastrophe underwriting risk adequately reflect the impact of natural catastrophe events. In view of the new available data and models, risk factors for several regions across natural hazards such as floods, windstorms, hail, earthquakes and subsidence should be amended.

• (57) Directive (EU) 2025/2 introduces new prerogatives and powers for supervisory authorities to grant proportionality measures or to waive group supervision as a result of excluding an undertaking from group supervision in accordance with Article 214 of Directive 2009/138/EC. It is important for the sector and the wider audience to know whether and how those new powers and prerogatives have been used in practice. Therefore, the aggregated statistical data which national supervisory authorities should be disclosed on key aspects of the application of the prudential framework should be extended to cover those new areas.

• (58) Delegated Regulation (EU) 2015/35 should therefore be amended accordingly,

HAS ADOPTED THIS REGULATION:

Article 1

Amendments to Delegated Regulation (EU) 2015/35

Delegated Regulation (EU) 2015/35 is amended as follows:

• (1) Article 1 is amended as follows:

• (a) the following point 45a is inserted:

• ‘45a. “future management action” means any action that the administrative, management or supervisory body of an insurance or reinsurance undertaking may expect to carry out under specific future circumstances;’;

• (b) the following point 46a is inserted:

• ‘46a. “expected profit included in future fees for servicing and management of funds” means the expected present value of future cash flows which result from the inclusion in technical provisions of fees for servicing and management of funds relating to existing insurance and reinsurance index-linked and unit-linked contracts that are expected to be charged, but that may not be charged for any reason, other than because the insured event has occurred, regardless of the legal or contractual rights of the policyholder to discontinue the policy;’;

• (c) points 55c and 55d are deleted;

• (d) the following points 64 to 67 are added:

• ‘64. “defaulted loan” means a loan where a default of the obligor has occurred as referred to in Article 178(1) of Regulation (EU) No 575/2013;

• 1. “forborne loan” means a loan in respect of which forbearance measures as referred to in Article 47b(1) to (3) of Regulation (EU) No 575/2013 have been applied;

• 1. “distributions” means the pay-out of accounting profits other than dividends to shareholders, members or similar, including share buybacks;

• 1. “foreseeable charges” means the amount of taxes and the amount of any obligations or circumstances arising during the related reporting period which are likely to reduce the profits of the undertaking.’;

• (2) Article 6 is replaced by the following:

‘Article 6

Double credit rating for securitisation positions other than STS securitisations

By way of derogation from Article 4(4), point (d), where only one credit assessment is available from a nominated ECAI for a securitisation position other than an STS securitisation, that credit assessment shall not be used. The capital requirements for that item shall be derived as if no credit assessment by a nominated ECAI is available.’

;

• (3) in Article 16(1), the following subparagraph is added:

‘By way of derogation from the first subparagraph, insurance and reinsurance undertakings that are classified as small and non-complex undertakings may value short-term deposits with maturities of less than 1 year at cost or amortised cost provided that the use of such valuation methods meets one of the following conditions:

• (a) it does not introduce material errors in the valuation of such deposits;

• (b) it leads to a value of short-term deposits that is lower than the value that would otherwise be calculated without using cost or amortised cost.’;

• (4) in Article 18(3), the third subparagraph is replaced by the following:

‘However, in the case of life insurance obligations where an individual risk assessment of the obligations relating to the insured person of the contract is carried out at the inception of the contract and the undertaking does not have the right to repeat the assessment before amending the premiums or benefits, insurance and reinsurance undertakings shall only take into account the right to assess at the level of the contract whether the premiums fully reflect the risk for the purposes of point (c).’;

• (5) in Article 20, the following subparagraph is added:

‘Insurance and reinsurance undertakings shall put in place internal procedures to avoid overreliance on data from past events with respect to climate change-related trends, including, where appropriate, by using climate scenarios.’;

• (6) in Article 31, paragraph 4 is replaced by the following:

‘4.   Expenses shall be projected taking into account the decisions of the administrative, management or supervisory body of the undertaking with regard to writing new business.’

;

• (7) the following Article 34a is inserted:

‘Article 34a

Use of the prudent deterministic valuation of the best estimate for life obligations with options and guarantees that are deemed immaterial

1. Insurance and reinsurance undertakings shall only use the prudent deterministic valuation of the best estimate for life obligations with options and guarantees that are not deemed material, as referred to in Article 77(8) of Directive 2009/138/EC, where all of the following conditions are met:

• (a) the insurance or reinsurance undertaking clearly identifies the life obligations with options and guarantees which it deems immaterial and to which it intends to apply the prudent deterministic valuation of the best estimate;

• (b) the time value of options and guarantees of the life obligations referred to in point (a) represents less than 5 % of the Solvency Capital Requirement;

• (c) the insurance or reinsurance undertaking confirms in writing that it intends to apply the calculation methodology referred to in paragraph 2 to the life obligations referred to in point (a) of this paragraph;

• (d) the undertaking is classified as small and non-complex undertaking.

For the purposes of the first subparagraph, point (b), insurance and reinsurance undertakings shall use the most recent set of scenarios that are laid down and published by EIOPA in accordance with Article 77e(1), point (ab), of Directive 2009/138/EC.

1. Where insurance and reinsurance undertakings use the prudent deterministic valuation of the best estimate for clearly identified life obligations with options and guarantees that are deemed immaterial, in accordance with paragraph 1, they shall value the best estimate of such obligations as the sum of the following:

• (a) the deterministic best estimate of the life obligations with options and guarantees that are deemed immaterial;

• (b) the product of a stochastic add-on and the Solvency Capital Requirement of the undertaking.

For the purposes of the first subparagraph, point (b), the stochastic add-on shall be equal to 5 %, unless the undertaking demonstrates to the satisfaction of the supervisory authority that another percentage would more appropriately reflect its risk profile. For the purposes of that demonstration, the insurance and reinsurance undertaking shall use the set of scenarios referred to in paragraph 1, second subparagraph.

1. Insurance and reinsurance undertakings that use the prudent deterministic valuation of the best estimate for clearly identified life obligations with options and guarantees that are deemed immaterial shall assume that the stochastic add-on referred to in paragraph 2, first subparagraph, point (b), is constant for calculating the Solvency Capital Requirement, including the loss-absorbing capacity of technical provisions referred to in Article 206.’

;

• (8) in Article 37(1), in the first subparagraph, the formula is replaced by the following:

‘ Image omitted; see official source ’;

• (9) Article 39 is replaced by the following:

‘Article 39

Cost-of-Capital rate

The Cost-of-Capital rate referred to in Article 77(5) of Directive 2009/138/EC shall be assumed to be equal to 4,75 %.’

;

• (10) Article 43 is amended as follows:

• (a) paragraph 2 is replaced by the following:

‘2.   The techniques, data specifications and parameters used for determining the technical information on the relevant risk-free interest rate term structure referred to in Article 77e(1) of Directive 2009/138/EC, including the ultimate forward rate, shall be transparent, prudent, reliable, objective and consistent over time.’

;

• (b) the following paragraph 6 is added:

‘6.   Notwithstanding paragraphs 2 to 5 of this Article, for the purposes of Article 43a(2), before changing the source of data used to determine the first smoothing point for a given currency, EIOPA shall inform the Commission, the European Parliament and the Council of the currency-related percentage which, based on the new data source, would most appropriately result in maintaining the first smoothing point at the same maturity as that applicable prior to the change in data source.’

;

• (11) the following Article 43a is inserted:

‘Article 43a

Currency-related percentages for the determination of the first smoothing point

1. At the application date of Directive (EU) 2025/2, for the determination of the first smoothing point for a currency in accordance with Article 77a(1) of Directive 2009/138/EC, the currency-related percentage above which the share of outstanding bonds with maturities longer than or equal to a given maturity among all outstanding bonds shall be considered sufficiently high within the meaning of Article 77a, paragraph 1, point (b), of that Directive shall be the following:

• (a) for the euro, the applicable percentage shall be the closest half-integer or integer percentage greater than or equal to the sum of:

• (i) 1,5 percentage point;

• (ii) the lowest percentage of outstanding bonds which would result in the determination of a first smoothing point of 20 years on 28 January 2025;

• (b) for currencies other than the euro, where on 29 January 2027 the last maturity for which the relevant risk-free interest rate term structure is not extrapolated was at least 20 years, the applicable percentage shall be the same as that applicable for the euro;

• (c) for currencies other than those referred to in points (a) and (b), the applicable percentage shall be half of the one applicable for the euro.

1. Where the data source to determine the first smoothing point for the euro is changed, the applicable currency-related percentage for that currency shall be the closest half-integer or integer percentage greater than or equal to the sum of 1,5 percentage point and the lowest percentage which, at the first reference date on which the new data source is used, results in a first smoothing point equal to that applicable during the previous calendar year.

By way of derogation, where the currency-related percentage determined in accordance with the first subparagraph does not result, at the first reference date on which the new data source is applied, in a first smoothing point equal to that applicable during the previous calendar year, the applicable percentage shall be the closest lower value which does result in such a first smoothing point.

For the purposes of this paragraph, Article 43(5) shall apply.’

;

• (12) Article 44 is replaced by the following:

‘Article 44

Relevant financial instruments to derive the basic risk-free interest rates

1. For each currency and maturity, the basic risk-free interest rates shall be derived on the basis of interest rate swap rates for interest rates of that currency. Interest rate swap rates that are not overnight indexed swap rates shall be adjusted to take account of credit risk.

1. For currencies where interest rate swap rates are not available from deep, liquid and transparent financial markets the rates of government bonds issued in that currency, adjusted to take account of the credit risk of the government bonds, shall be used to derive the basic risk free-interest rates, provided that, such government bond rates are available from deep, liquid and transparent financial markets.’

;

• (13) in Article 45, the first sentence is replaced by the following:

‘Where an adjustment for credit risk is applied pursuant to Article 44(1), the adjustment shall be determined in a transparent, prudent, reliable and objective manner that is consistent over time.’;

• (14) Article 46 is amended as follows:

• (a) in paragraph 1, the second sentence is deleted;

• (b) the following paragraphs 1a, 1b and1c are inserted:

‘1a.   The extrapolated relevant risk-free interest rates for a currency shall be equal to the following:

Image omitted; see official source

where:

• (a) FSP denotes the first smoothing point as referred to in Article 77a(1) of Directive 2009/138/EC;

• (b) h denotes the number of years exceeding the first smoothing point;

• (c) r FSP denotes the annualised discretely compounded relevant risk-free interest rate at a maturity equal to the first smoothing point;

• (d) Image omitted; see official source

denotes the annualised discretely compounded relevant risk-free interest rate at a maturity equal to the sum of the first smoothing point and h;

• (e) f h denotes the annualised continuously compounded forward rate calculated in accordance with paragraph 1b;

• (f) exp( ) denotes the exponential function.

1b.   For the purposes of paragraph 1a, point (e), the forward rate fh shall be equal to the following:

Image omitted; see official source

where:

• (a) UFR denotes the ultimate forward rate referred to in Article 47;

• (b) LLFR denotes the last liquid forward rate determined in accordance with paragraph 1c;

• (c) α denotes the parameter determining the speed of the convergence towards the ultimate forward rate UFR;

• (d) ln( ) denotes the natural logarithm;

• (e) exp( ) denotes the exponential function.

The parameter α referred to in point (c) of the first subparagraph shall be equal to 40 % for the Swedish Krona and 11 % for other currencies.

1c.   For the purposes of paragraph 1b, the last liquid forward rate for a currency as referred to in point (b) of that paragraph shall be a weighted average of the following forward rates:

• (a) the annualised continuously compounded forward rate derived from the basic risk-free interest rate term structure for the period up to the first smoothing point and beginning at the closest shorter maturity where the basic risk-free interest rate term structure is derived on the basis of interest rate swap rates or government bonds;

• (b) the annualised continuously compounded forward rate derived from the basic risk-free interest rate term structure and risk-adjusted interest rate swap rates or, as applicable, government bond rates for the periods from the first smoothing point to the maturities after the first smoothing point where interest rate swap rates or, as applicable, government bond rates are available from deep, liquid and transparent financial markets.

For the calculation of the weighted average referred to in the first subparagraph, the relevant annualised continuously compounded forward rates shall be weighted by the average notional amount of traded contracts of the interest rate swaps of the relevant maturity.

For currencies where no interest rate swap rates are available from deep, liquid and transparent financial markets for maturities after the first smoothing point, the last liquid forward rate shall be equal to the annualised continuously compounded forward rate determined in accordance with point (a) of the first sub-paragraph.

Notwithstanding the first subparagraph, where an insurance or reinsurance undertaking applies the volatility adjustment to calculate the weighted average referred to in the first paragraph, the volatility adjustment shall be added to the annualised continuously compounded forward rate referred to in point (a) of that subparagraph.’

;

• (15) the following Article 46a is inserted:

‘Article 46a

Phasing-in of the extrapolation

1. Where an insurance or reinsurance undertaking is allowed to apply the phasing-in mechanism referred to in Article 77a(2) of Directive 2009/138/EC, for each currency other than the Swedish Krona, the parameter α referred to in Article 46(1b), shall be decreased linearly at the beginning of each calendar year from 20 % during the year starting from 1 January 2027 to 11 % on 1 January 2032.

1. Where an insurance or reinsurance undertaking is allowed to apply the phasing-in mechanism referred to in Article 77a(2) of Directive 2009/138/EC, for the Swedish Krona, the parameter α referred to in Article 46(1b) shall be decreased linearly at the beginning of each calendar year from 70 % during the year starting from 1 January 2027 to 40 % on 1 January 2032.’

;

• (16) in Article 47(1), the first sentence is replaced by the following:

‘For each currency, the ultimate forward rate referred to in Article 46(1b), point (a) shall be stable over time and shall only change as a result of changes in long-term expectations.’;

• (17) in Article 49, paragraph 1 is replaced by the following:

‘1.   The reference portfolios referred to in Article 77d(4a) of Directive 2009/138/EC shall be determined in a transparent, prudent, reliable and objective manner that is consistent over time. The methods applied when determining the reference portfolios shall be the same for all currencies and countries.’

;

• (18) Articles 50 and 51 are replaced by the following:

‘Article 50

Formula to calculate the spread underlying the volatility adjustment

For each currency and each country, the spread referred to in Article 77d(2) and (4) of Directive 2009/138/EC shall be equal to the following:

S = wgov · Sgov + wcorp · Scorp

where:

• (a) wgov denotes the ratio of the value of government bonds included in the reference portfolio of assets for that currency or country and the value of all bonds, loans and securitisations included in that reference portfolio;

• (b) Sgov denotes the average currency spread on government bonds included in the reference portfolio of assets for that currency or country;

• (c) wcorp denotes the ratio of the value of bonds other than government bonds, loans and securitisations included in the reference portfolio of assets for that currency or country and the value of all bonds, loans and securitisations included in that reference portfolio;

• (d) Scorp denotes the average currency spread on bonds other than government bonds, loans and securitisations included in the reference portfolio of assets for that currency or country.

For the purposes of this Article, “government bonds” means exposures to central governments and central banks.

Article 51

Risk-corrected spread

1. For the purposes of Article 77d(3) and (4) of Directive 2009/138/EC, the portion of the average currency spread that is attributable to a realistic assessment of expected losses, unexpected credit risk or any other risk (“risk correction”) shall be calculated in accordance with paragraphs 2 to 4 of this Article.

1. The risk correction on government bonds issued by Member States of the EEA shall be equal to the following:

RC = 30 %

Image omitted; see official source

min(S⁺; LTAS⁺) + 20 %

Image omitted; see official source

max {0; min(S⁺ – LTAS⁺; LTAS⁺)} + 15 %

Image omitted; see official source

max(0; S⁺ – 2

Image omitted; see official source

LTAS⁺)

where:

• (a) S ⁺ denotes the maximum of zero and the average spread of government bonds issued by Member States of the European Economic Area of the same duration, credit quality and asset class in the representative portfolio, as observed in financial markets;

• (b) LTAS ⁺ denotes the maximum of 0 and the long-term average spread of government bonds issued by Member States of the European Economic Area of the same duration, credit quality and asset class in the representative portfolio, as observed in financial markets.

Without prejudice to the first subparagraph, the risk correction on government bonds issued by Member States of the European Economic Area shall never exceed the maximum of zero and 65 % of the long-term average spread of government bonds issued by Member States of the European Economic Area of the same duration, credit quality and asset class in the representative portfolio as observed in financial markets.

1. The risk correction on bonds other than government bonds issued by Member States of the European Economic Area, loans and securitisations in the representative portfolio, shall be equal to the following:

RC = 50 %

Image omitted; see official source

min(S⁺; LTAS⁺) + 40 %

Image omitted; see official source

max {0; min(S⁺ – LTAS⁺, LTAS⁺)} + 30 %