1.Insurance and reinsurance undertakings may, subject to prior approval by their supervisory authority, apply a transitional adjustment to the relevant risk-free interest rate term structure with respect to admissible insurance and reinsurance obligations.
1a.After 30 January 2027, supervisory authorities shall only approve a transitional adjustment to the relevant risk-free interest rate term structure in the following cases:
during a period of 18 months preceding the approval, the rules of this Directive applied for the first time to the insurance or reinsurance undertaking requesting the approval after being exempted from the scope of this Directive pursuant to Article 4;
during a period of six months preceding the approval, the insurance or reinsurance undertaking requesting the approval received authorisation to accept a portfolio of insurance or reinsurance contracts, where the transferring insurance or reinsurance undertaking applied the transitional adjustment to the relevant risk-free interest rate term structure with respect to that portfolio of contracts prior to the transfer.
2.For each currency the adjustment shall be calculated as a portion of the difference between:
the interest rate as determined by the insurance or reinsurance undertaking in accordance with the laws, regulations and administrative provisions which are adopted pursuant to Article 20 of Directive 2002/83/EC at the last date of the application of that Directive;
the annual effective rate, calculated as the single discount rate that, where applied to the cash flows of the portfolio of admissible insurance and reinsurance obligations, results in a value that is equal to the value of the best estimate of the portfolio of admissible insurance and reinsurance obligations where the time value of money is taken into account using the relevant risk-free interest rate term structure referred to in Article 77(2).
Where Member States have adopted laws, regulations and administrative provisions pursuant to Article 20(1)B(a)(ii) of Directive 2002/83/EC, the interest rate referred to in point (a) of the first subparagraph of this paragraph shall be determined using the methods used by the insurance or reinsurance undertaking at the last date of the application of Directive 2002/83/EC.
The portion referred to in the first subparagraph shall decrease linearly at the end of each year from 100 % during the year starting from 1 January 2016 to 0 % on 1 January 2032.
Where insurance and reinsurance undertakings apply the volatility adjustment referred to in Article 77d, the relevant risk-free interest rate term structure referred to in point (b) shall be the adjusted relevant risk-free interest rate term structure set out in Article 77d.
3.The admissible insurance and reinsurance obligations shall comprise only insurance or reinsurance obligations that meet the following requirements:
the contracts that give rise to the insurance and reinsurance obligations were concluded before the first date of the application of this Directive, excluding contract renewals on or after that date;
until the last date of the application of Directive 2002/83/EC, technical provisions for the insurance and reinsurance obligations were determined in accordance with the laws, regulations and administrative provisions which are adopted pursuant to Article 20 of that Directive at the last date of the application thereof;
Article 77b is not applied to the insurance and reinsurance obligations.
4.Insurance and reinsurance undertakings applying paragraph 1 shall:
not include the admissible insurance and reinsurance obligations in the calculation of the volatility adjustment set out in Article 77d;
not apply Article 308d;
within the part of their report on their solvency and financial condition consisting of information addressed to market professionals referred to in Article 51(1b), publicly disclose all of the following:
the fact that they apply the transitional adjustment to the risk-free interest rate term structure;
the quantification of the impact of not applying that transitional measure on their financial position;
where the undertaking would comply with the Solvency Capital Requirement without application of that transitional measure, the reasons for its application;
an assessment of the dependency of the undertaking on that transitional measure and, where applicable, a description of the measures taken or planned by the undertaking to reduce or remove the dependency.