Solvency II extrapolation proposals feed volality debate

The European Insurance and Occupational Pensions Authority’s report on the long-term guarantees assessment has reignited the debate on the methodology for determining the risk-fee term structure. The authority’s proposals for a long extrapolation period have provoked robust criticism from some sections of the insurance industry and raised questions about how market volatility should best be dealt with by Solvency II. Louie Woodall reports

The European Insurance and Occupational Pensions Authority’s (Eiopa) report on the long-term guarantees impact assessment (LTGA) raised eyebrows sky-high among the European insurance industry.

Insurers had hoped the study would resolve the vexed issue of how to value long-term liabilities in a way that reflects their business practices, but instead it produced a range of new and revised fixes that left almost everyone unhappy.
Critics say that in some instances, Eiopa, responsible for conducting