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Solvency II: Applying the transitional measure to equity risk
In principle, insurers applying the standard formula are obliged to apply the transitional measure laid down in Article 308b(13) of the Solvency II Directive to what are known as type 1 shares purchased on or before 1 January 2016 that are not covered by the duration-based equity risk module.
When doing so, please also refer to the requirements with respect to identification and documentation of the relevant shares as laid down in the draft implementing technical standards with regard to procedures for the application of the transitional measure for the calculation of the equity risk sub-module.
Insurers not wishing to make use of this transitional measure may apply a 100% weighting to the parameter referred to in Article 308b(13)(b) as soon as Solvency II enters into force. This means that the transitional measure does, in effect, not apply. In such cases, insurers do not need to satisfy the requirements of the above-mentioned implementing technical standards either.