1.By way of derogation from Article 51a, where the domestic currency of a Member State is pegged to the euro, and the basic risk-free interest rate term structure for the euro, adjusted for currency risk, is used to calculate the best estimate with respect to insurance or reinsurance obligations denoted in that currency in accordance with Article 48(1), insurance and reinsurance undertakings may calculate one single credit spread sensitivity ratio for the euro and that currency. In that case, the credit spread sensitivity ratio shall be equal to the following:
CSSReuro, pegged currency = max [min (
\frac{\mathrm{PVBP}\left(\mathrm{MV}^{\mathrm{FI}}\right)}{\mathrm{PVBP}(\mathrm{BEL})}
, 1), 0]
where:
CSSReuro, pegged currency denotes the credit spread sensitivity ratio of the insurance or reinsurance undertaking for both the euro and the pegged currency;
PVBP(MVFI) denotes the price value of a basis point of the value of the investments in bonds, loans and securitisations of the insurance or reinsurance undertaking denominated in both the euro and the pegged currency, calculated in accordance with paragraph 2;
PVBP(BEL) denotes the price value of a basis point of the value of the best estimate of liabilities of the insurance or reinsurance undertaking, denominated in both the euro and the pegged currency, calculated in accordance with paragraph 3.
By way of derogation from the first subparagraph, where PBVP(BEL) for a given currency pegged to the euro is equal to 0 or is negative, the credit spread sensitivity ratio for that currency pegged to the euro shall be equal to 1.
2.For both the euro and the pegged currency considered jointly, the price value of a basis point of the investments in bonds, loans and securitisations of an insurance or reinsurance undertaking shall be equal to the following:
PVBP(MVFI) =
\frac{\mathrm{MV}^{\mathrm{FI}} - \mathrm{MV}^{\mathrm{FI}*}}{\mathrm{VA}^*}
where:
MV FI denotes the value of the investments in bonds, loans and securitisations of the insurance or reinsurance undertaking denominated in both the euro and the pegged currency, where the value is determined in accordance with Article 75 of Directive 2009/138/EC;
VA* denotes the maximum of the notional volatility adjustment for the euro and the notional volatility adjustment for the pegged currency, calculated in accordance with Article 77d(3) of Directive 2009/138/EC, under the assumption that the credit spread sensitivity ratio is equal to 1;
MVFI* denotes the value of investments in bonds, loans and securitisations of the insurance or reinsurance undertaking denominated in both the euro and the pegged currency, where the value is determined in accordance with Article 75 of Directive 2009/138/EC, under the assumption that for each asset the spread increases by an amount equal to the value of the notional volatility adjustment for all maturities.
For the purposes of points (a) and (c), in relation to unit-linked business, the insurance or reinsurance undertaking shall exclude fixed income investments which give rise to no or immaterial credit spread risk exposure for the undertaking.
3.For both the euro and the pegged currency considered jointly, the price value of a basis point of the best estimate of liabilities of an insurance or reinsurance undertaking shall be equal to the following:
PVBP(BEL) =
\frac{\mathrm{BEL} - \mathrm{BEL}^{*}}{\mathrm{VA}^{*}}
where:
BEL denotes the sum of the value of the best estimate of liabilities of the insurance or reinsurance undertaking denominated in euro without a volatility adjustment and the value of the best estimate of liabilities denoted in the pegged currency without a volatility adjustment, and for which the basic risk-free rate term structure for the euro, adjusted for currency risk, is used in accordance with Article 48(1) of this Regulation, where both values are determined in accordance with Article 75 of Directive 2009/138/EC;
VA* denotes the maximum of the notional volatility adjustment for the euro and the notional volatility adjustment for the pegged currency, calculated in accordance with Article 77d(3) of Directive 2009/138/EC, under the assumption that the credit spread sensitivity ratio is equal to 1;
BEL* denotes the sum of the value of the best estimate of liabilities of the insurance or reinsurance undertaking denominated in euro, and the value of the best estimate of liabilities denominated in the pegged currency and for which the basic risk free rate term structure for the euro, adjusted for currency risk, is used in accordance with Article 48(1), where both values are determined in accordance with Article 75 of Directive 2009/138/EC, under the assumption that the notional volatility adjustment is applied to the relevant risk-free interest rate term structures.
For the purposes of point (c), a revaluation of the best estimate shall be performed, taking into account the effect of future discretionary benefits. However, for that revaluation, no impact of a change in credit spreads on the value of assets held by the undertaking shall be taken into account.
4.Where the credit spread sensitivity ratio for a given currency was most recently calculated less than one year before the reference date for valuing the best estimate of liabilities, insurance and reinsurance undertakings shall not be required to recalculate the ratio, provided that they are able to demonstrate to the satisfaction of their supervisory authority that the ratio is not materially changed.