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27 March 2015 Supervision Supervision label Q&A

Question:

May an insurer use a matching adjustment to determine the best estimate of a portfolio of insurance obligations and how can an insurer apply for use of a matching adjustment?

Answer:

Under Solvency II, insurers have the option of using a matching adjustment for a specific portfolio of insurance obligations. An insurer's use of the matching adjustment is subject to prior approval by the supervisory authority. As part of its approval process, DNB assesses whether the insurer has complied with the legal conditions for use of the matching adjustment, and establishes the completeness, accuracy and adequacy of the information used.

Who can apply?

Every insurer is entitled to apply for use of the matching adjustment. A single application may cover more than one insurance portfolio. In that case, the application must be structured in such a way that it is clear what information applies to which insurance portfolio.

When can you apply?

Solvency II allows insurers to submit their applications from 1 April 2015.

Application package

The Implementing Technical Standards regarding the application procedure for use of the matching adjustment describe the minimum information requirements. For information about the content of the application for use of the matching adjustment, please refer to these Implementing Technical Standards.

How can you submit your application?

The required information can be submitted using DNB's E-line application (see Applications - general). Before submitting your application, please contact your examining officer.

Assessment

The application phase starts with determining whether the application package contains all the evidence required. As soon as the package is considered complete, the substantive assessment commences. To ensure an efficient assessment process, the documents must be grouped in a way that follows the structure of the Implementing Technical Standards (ITS).

In outline the structure is as follows:

  • General (Article 1 of the ITS)
  • Investments (Article 2 of the ITS)
  • Obligations (Article 3 of the ITS)
  • Cash-flow matching and portfolio management (Article 4 of the ITS)
  • Additional documentation (Article 5 of the ITS)

The general part must contain an overview detailing where the information provided can be found. This overview must also follow the structure of the Implementing Technical Standards.

Rules and regulations

DNB will assess the application package against the Solvency II rules and regulations regarding the matching adjustment, i.e. the Solvency II Directive, the Solvency II Regulation and the Implementing Technical Standards on the application of the matching adjustment. For an overview, please refer to this page.

Decision

The national supervisory authority will decide on the use of the matching adjustment. For insurance groups, we will take a joint decision with the College of Supervisors. We will take a decision within six months from receipt of a complete application package.

Relevant to:

  • Insurers