EIOPA has published today the Opinion on disclosure of information related to the use of transitional measures in the calculation of technical provisions.
The objective of the Opinion is to clarify expectations of National Supervisory Authorities on the disclosure of information in the Solvency and Financial Condition Report (SFCR) regarding the use of the transitional measures, in particular considering the impact of the methodology used for the decrease of the transitional.
The Opinion clarifies that in view of complying with the principles of public disclosure and with Chapter XII of Title I of Commission Delegated Regulation (EU) 2015/35, the SFCR, group SFCR or single SFCR should contain the information necessary to reflect the estimated impact of the decrease of the portion of the adjustment performed on the first day of the next financial year in the technical provisions, Minimum Capital Requirement, Solvency Capital Requirement and Eligible own funds to cover the capital requirements.
This information is considered relevant only where the recalculation of technical provisions would lead to a material impact in the solvency position of the undertaking in accordance with Article 291 of Commission Delegated Regulation (EU) 2015/35.
Articles 308c and 308d of Directive 2009/138/EC address the application of the transitional adjustment to the relevant risk-free interest rate term structure and the transitional deduction to technical provisions, also known as transitional measures. Specifically, the third subparagraph of Article 308c(2) and the second subparagraph of Article 308d(2) indicate that the effect of the transitional measures shall decrease linearly at the end of each year from 100% during the year starting from 1 January 2016 to 0% on 1 January 2032.
The application of the referred articles implies that the calculation of the technical provisions at the end of the year should not reflect the reduction of the adjustment related to that year. The reduction should only be made on the first day of the following financial year.
In this case the information referring to the amounts of technical provisions, Solvency Capital Requirement, Minimum Capital Requirement, basic own funds and eligible own funds considering the use of the transitional measures reflect an event that might materially change immediately on the first day of the following financial year the information to be disclosed.