Swedish insurers warn of manipulation threat to new discount curve

Concerns Solvency II-based risk-free curve could be distorted by speculators as market begins to adjust ALM hedges


Swedish insurers have welcomed a proposal for a Solvency II-based discount curve, but there are concerns that the curve could be distorted by speculators.

The Swedish Financial Supervisory Authority (FSA) is consulting on the methodology for determining the discount curve. Under the proposals, liabilities will be discounted primarily using swap rates up to the 10-year last-liquid point (LLP), after which the curve will be extrapolated to an ultimate forward rate of 4.2% at the 20-year point.


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