Solvency II - UK pressure on QIS4 discount rate


Debate over the correct discount rate to value insurance liabilities in Solvency II has been continued by the UK, with several high profile players arguing for the inclusion of an illiquidity premium when calculating the reserves needed to back annuity business.

UK insurers argue that the illiquid nature of annuity promises means that the assets used to back them can also be more illiquid, and therefore have higher returns. This means that a higher discount rate can be used to discount annuity

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