EV reporting under Solvency II

Discussion in 'SA2' started by Viki2010, Sep 9, 2017.

  1. Viki2010

    Viki2010 Member

    The core reading states "any difference between the BE investment returns assumed in the EV projection basis and the discount rates used in the BEL"

    - are the BE investment returns RFR, assuming we are applying market consistent principles of valuation.
    - if yes, are these based on the government bonds?
    - or depending on a company there might be a few different variations of the BE investment returns in EV?
     
  2. Lynn Birchall

    Lynn Birchall ActEd Tutor Staff Member

    Hi

    If the company is complying with the CFO's MCEV Principles, then the reference rate (ie the RFR) will be based on swaps (where available). For liabilities where this is appropriate (eg annuities) the discount rate might be adjusted by a liquidity premium. This liquidity premium may well be different from any matching adjustment the company used in calculating its Solvency II BEL.

    Best wishes
    Lynn
     
  3. Mbotha

    Mbotha Member

    Would the liquidity premium also be applicable to the investmen return assumption (in the case of MCEV)?
     
  4. Mbotha

    Mbotha Member

    Please may I get some assistance on this question?

    The core reading mentions that the reference rate is calibrated to swap yield curves, plus a liquidity premium. I'm assuming that, because the reference rate (which includes the liquidity premium) is used to set both the discount rate and the investment return assumption, the investment return assumption would include the liquidity premium. Is that right?
     
  5. Em Francis

    Em Francis ActEd Tutor Staff Member

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