1. 1. Where Articles 88 and 89 are complied with, captive insurance or captive reinsurance undertakings may calculate the capital requirement for interest rate risk referred to in Article 165 as follows:
((a))(a) the sum, for each currency, of the capital requirements for the risk of an increase in the term structure of interest rates as set out in paragraph 2 of this Article;
((b))(b) the sum, for each currency, of the capital requirements for the risk of a decrease in the term structure of interest rates as set out in paragraph 3 of this Article.
2. 2. For the purposes of point (a) of paragraph 1 of this Article, the capital requirement for the risk of an increase in the term structure of interest rates for a given currency shall be equal to the following:
\mathrm{IR}_{\mathrm{up}} = \sum_{i} \mathrm{MVAL}_{i} \cdot \mathrm{dur}_{i} \cdot \mathrm{rate}_{i} \cdot \mathrm{stress}_{(i,\mathrm{up})} - \sum_{\mathrm{lob}} \mathrm{BE}_{\mathrm{lob}} \cdot \mathrm{dur}_{\mathrm{lob}} \cdot \mathrm{rate}_{\mathrm{lob}} \cdot \mathrm{stress}_{(\mathrm{lob},\mathrm{up})}
where:
((a))(a) the first sum covers all maturity intervals i setintervalsiset out in paragraph 4 of this Article;
((b))(b) MVAL_{i} denotesMVALidenotes the value in accordance with Article 75 of Directive 2009/138/EC of assets less liabilities other than technical provisions for maturity interval i;intervali;
((c))(c) dur_{i} denotesduridenotes the simplified duration of maturity interval i;intervali;
((d))(d) rate_{i} denotesrateidenotes the relevant risk-free rate for the simplified duration of maturity interval i;intervali;
((e))(e) stress_{(i,up)} denotesstress(i,up)denotes the relative upward stress of interest rate for simplified duration of maturity interval i;intervali;
((f))(f) the second sum covers all lines of business set out in Annex I of this Regulation;
((g))(g) BE_{lob} denotesBElobdenotes the best estimate for line of business lob;businesslob;
((h))(h) dur_{lob} denotesdurlobdenotes the modified duration of the best estimate in line of business lob;businesslob;
((i))(i) rate_{lob} denotesratelobdenotes the relevant risk-free rate for modified duration in line of business lob;businesslob;
((j))(j) stress_{(lob,up)} denotesstress(lob,up)denotes the relative upward stress of interest rate for the modified duration dur_{lob}.durationdurlob.
3. 3. For the purposes of point (b) of paragraph 1 of this Article, the capital requirement for the risk of a decrease in the term structure of interest rates for a given currency shall be equal to the following:
\mathrm{IR}_{\mathrm{down}} = \sum_{\mathrm{i}} \mathrm{MVAL}_{\mathrm{i}} \cdot \mathrm{dur}_{\mathrm{i}} \cdot \mathrm{rate}_{\mathrm{i}} \cdot \mathrm{stress}_{(\mathrm{i},\mathrm{down})} - \sum_{\mathrm{lob}} \mathrm{BE}_{\mathrm{lob}} \cdot \mathrm{dur}_{\mathrm{lob}} \cdot \mathrm{rate}_{\mathrm{lob}} \cdot \mathrm{stress}_{(\mathrm{lob},\mathrm{down})}
where:
((a))(a) the first sum covers all maturity intervals i setintervalsiset out in paragraph 4;
((b))(b) MVAL_{i} denotesMVALidenotes the value in accordance with Article 75 of Directive 2009/138/EC of assets less liabilities other than technical provisions for maturity interval i;intervali;
((c))(c) dur_{i} denotesduridenotes the simplified duration of maturity interval i;intervali;
((d))(d) rate_{i} denotesrateidenotes the relevant risk-free rate for the simplified duration of maturity interval i;intervali;
((e))(e) stress_{(i,down)} denotesstress(i,down)denotes the relative downward stress of interest rate for simplified duration of maturity interval i;intervali;
((f))(f) the second sum covers all lines of business set out in Annex I of this Regulation;
((g))(g) BE_{lob} denotesBElobdenotes the best estimate for line of business lob;businesslob;
((h))(h) dur_{lob} denotesdurlobdenotes the modified duration of the best estimate in line of business lob;businesslob;
((i))(i) rate_{lob} denotesratelobdenotes the relevant risk-free rate for modified duration in line of business lob;businesslob;
((j))(j) stress_{(lob,stress(lob, down)} denotedown)denote the relative downward stress of interest rate for modified duration dur_{lob}.durationdurlob.
4. 4. The maturity intervals i and the simplified duration dur idur_{i} referred to in points (a) and (c)of paragraph 2 and in point (a) and (c) of paragraph 3 shall be as follows:
((a))(a) up to the maturity of one year, the simplified duration shall be 0.5 years;
((b))(b) between maturities of 1 and 3 years, the simplified duration shall be 2 years;
((c))(c) between maturities of 3 and 5 years, the simplified duration shall be 4 years;
((d))(d) between maturities of 5 and 10 years, the simplified duration shall be 7 years;
((e))(e) from the maturity of 10 years onwards, the simplified duration shall be 12 years.