Risk-free interest rates

(1) Insurance undertakings may, with the approval of the supervisory authority, make a temporary adjustment to the relevant risk-free interest rate term structure, having regard to the eligible insurance obligations.
(2) The adjustment is calculated, for each currency, as a proportion of the difference between 1. the interest rate that was determined by the insurance undertaking in accordance with section 65 of the Insurance Supervision Act and the statutory instrument issued for this purpose, in the versions respectively applicable and in force until 31 December 2015, and 2. the effective annual interest rate, calculated as the constant discount rate that, if applied to the cash flows of the portfolio of eligible insurance obligations, results in a value equal to the best estimate of the portfolio of eligible insurance or reinsurance obligations, when the time value of money is taken into account using the relevant risk-free interest rate term structure under section 77(1). The proportion named in the first sentence decreases linearly, at the end of each calendar year, from 100 percent from 2016 to 0 percent on 1 January 2032. Where insurance undertakings apply the volatility adjustment under section 82, the relevant risk-free interest rate term structure under the first sentence, point 2, must include the volatility adjustment under section 82.
(3) Only insurance obligations satisfying the following requirements are regarded as eligible insurance obligations within the meaning of subsection (1): 1. the contracts giving rise to the insurance obligations were concluded before 1 January 2016; renewals of these contracts on or after this point in time do not result in eligible insurance obligations, 2. the technical provisions for the insurance obligations were determined in accordance with section 65 of the Insurance Supervision Act and the statutory instrument issued for this purpose, in the versions respectively applicable and in force until 31 December 2015, and 3. no matching adjustment under section 80 is made for the insurance obligations.
(4) Where insurance undertakings apply subsection (1), then they 1. may not include the eligible insurance obligations in calculating the volatility adjustment under section 82, 2. may not apply section 352, 3. must disclose, within their solvency and financial condition report under section 40, that they are making a temporary adjustment to the relevant risk-free interest rate term structure, and must quantify the effect of not applying this transitional measure on their financial position.