(32)Insurance and reinsurance undertakings should not use overly optimistic assumptions when projecting future taxable profits after an exceptional loss scenario. Therefore, when calculating with the standard formula the loss-absorbing capacity of deferred taxes, insurance and reinsurance undertakings should take into account their financial and solvency position after the instantaneous loss, and the increased uncertainty regarding the projection of future taxable profits. Furthermore, the assumptions for projecting future taxable profits following the instantaneous loss, including the assumed rates of return on the insurance or reinsurance undertaking's investments, should not be more favourable than the assumptions applied to the valuation of deferred taxes on the balance sheet, and the projected total amount of new business should not exceed that of the business planning. Insurance and reinsurance undertakings should only be allowed to assume higher returns than those implied in the relevant interest rate term structure where they can demonstrate that those returns will be realised after the instantaneous loss.