Proposals for stable Solvency II credit risk adjustment 'good news' but floor sparks controversy

European commission

The European Commission has attempted to address fears over a volatile Solvency II risk-free rate with proposals for a stable credit risk adjustment (CRA) in draft papers being circulated. But the unofficial draft of the Level 2 delegated acts is also set to put the commission at loggerheads with the insurance industry, as the proposals place an artificial floor on the adjustment of 10 basis points.

The CRA is a deduction for credit risk applied to the benchmark swap curve for calculating the ri

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