Adjustment for the loss-absorbing capacity of technical provisions and deferred taxes

(1) The adjustment for the loss-absorbing capacity of technical provisions and deferred taxes named in section 99, point 3, takes into account the potential compensation of unexpected losses through a simultaneous decrease in technical provisions, in deferred taxes, or a combination of both.
(2) This adjustment takes into account the risk-mitigating effect produced by future discretionary benefits under insurance contracts, to the extent that insurance undertakings can demonstrate that a reduction in such benefits may be used to offset unexpected losses. The risk-mitigating effect produced by future discretionary benefits may not be higher than the sum of technical provisions and deferred taxes associated with those future discretionary benefits.
(3) For the purposes of subsection (2), the value of future discretionary benefits under adverse circumstances is compared with the value of discretionary benefits under the basic assumptions used for calculating the best estimate.