Solvency II Review – What’s New for the Long-Term Guarantees

Exploring the new interest-rate extrapolation and volatility adjustment methods

d‑fine’s latest whitepaper on the Solvency II Review reviews how the Long‑Term Guarantees (LTG) measures on interest rates and spreads impact the valuation of insurance liabilities and own funds for (re-)insurers. A special focus is placed on the technical and operational challenges typically encountered during implementation and go-live.

The paper provides a comprehensive analysis of the new interest rate extrapolation method, examining how the revised approach impacts discounting and addresses long-term rate hedging issues that arise under the currently used Smith-Wilson extrapolation.

With regard to the volatility adjustment (VA), the whitepaper analyzes the consequences of the regulatory shift to an undertaking-specific, market-dependent framework, with a focus on the new Credit Spread Sensitivity Ratio (CSSR), representing a truly undertaking-specific VA.

Across both topics, the whitepaper highlights common implementation challenges experienced in practice, including

calculating the CSSR calculation under tight closing timelines,
benchmarking DVA against both EIOPA and undertaking‑specific portfolios,
managing undertaking‑specific VA levels across insurance groups, and
integrating the revised extrapolation and VA into existing actuarial and risk‑management infrastructures.

You can download the complete white paper at the top of this page.