- Latest available (Revised)
- Original (As made)
The Solvency 2 (Credit Risk Adjustment) Regulations 2021
You are here:
- UK Statutory Instruments
- 2021 No. 463
- Whole Instrument
- Previous
- Next
What Version
Opening Options
More Resources
Status:
This is the original version (as it was originally made).
Statutory Instruments
2021 No. 463
Financial Services And Markets
The Solvency 2 (Credit Risk Adjustment) Regulations 2021
Made
13th April 2021
Laid before Parliament
14th April 2021
Coming into force
28th May 2021
The Treasury, in exercise of the powers conferred by regulation 2 and paragraph 9(b) of Schedule 1 to the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019(1), make the following Regulations.
Citation and Commencement
1. These Regulations may be cited as The Solvency 2 (Credit Risk Adjustment) Regulations 2021 and come in to force on 28th May 2021.
Amendment to Commission Delegated Regulation (EU) No. 2015/35
2. In Article 45 (adjustment to swap rates for credit risk) of Commission Delegated Regulation (EU) No. 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency 2)(2), for “The adjustment shall be determined” to the end of the paragraph substitute “The adjustment is to be calculated to reflect the level of credit risk inherent in a financial instrument which is used to derive the basic risk-free interest rate. If a relevant financial instrument contains negligible credit risk, the adjustment may be zero.”.
David Rutley
Michael Tomlinson
Two of the Lords Commissioners of Her Majesty’s Treasury
13th April 2021
EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations amend Article 45 of the Commission Delegated Regulation (EU) No. 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency 2) (“the Commission Delegated Regulation”).
The Commission Delegated Regulation, which provides a prudential framework for insurance and reinsurance undertakings, forms part of EU retained law for the purposes of the European Union (Withdrawal) Act 2018 (c.16) (see section 6 of that Act) following the UK’s withdrawal from the EU. The Commission Delegated Regulation requires undertakings to calculate (among other things) certain technical provisions to ensure adequate capital is held. One of the contributing calculations is the rate of the basic risk-free interest rate term structure which must be adjusted to take account of credit risk (see Article 44 of the Commission Delegated Regulation). Article 45 sets out how the adjustment for credit risk is to be determined.
These Regulations delete the provision in Article 45 of the Commission Delegated Regulation which specifies an adjustment based on the difference between the credit risk reflected in the floating rate of interest rate swaps and overnight indexed swap rates. Such provision was based on the continued use of benchmarks which reflect the interest rate at which banks could borrow money on unsecured terms in wholesale markets, such as the London Inter-bank Offered Rate (known as LIBOR). Following the discontinuation of LIBOR it is necessary to substitute new provision in Article 45 to reflect the appropriate adjustment for the credit risk of other benchmarks, in particular the Sterling Overnight Index Average (SONIA).
These Regulations therefore substitute in Article 45 a new methodology for the credit risk adjustment which reflects the transition from LIBOR to SONIA or other benchmarks.
No impact assessment has been produced for this instrument as we do not foresee any, or any significant impact, on the private, voluntary or public sector.
(2)
OJ No. L 12, 17.1.2015, p. 1
Options/Help
Print Options
PrintThe Whole Instrument
Legislation is available in different versions:
Latest Available (revised):The latest available updated version of the legislation incorporating changes made by subsequent legislation and applied by our editorial team. Changes we have not yet applied to the text, can be found in the ‘Changes to Legislation’ area.
Original (As Enacted or Made): The original version of the legislation as it stood when it was enacted or made. No changes have been applied to the text.
Opening Options
Different options to open legislation in order to view more content on screen at once
Explanatory Memorandum
Explanatory Memorandum sets out a brief statement of the purpose of a Statutory Instrument and provides information about its policy objective and policy implications. They aim to make the Statutory Instrument accessible to readers who are not legally qualified and accompany any Statutory Instrument or Draft Statutory Instrument laid before Parliament from June 2004 onwards.
More Resources
Access essential accompanying documents and information for this legislation item from this tab. Dependent on the legislation item being viewed this may include:
- the original print PDF of the as enacted version that was used for the print copy
- lists of changes made by and/or affecting this legislation item
- confers power and blanket amendment details
- all formats of all associated documents
- correction slips
- links to related legislation and further information resources
Impact Assessments
Impact Assessments generally accompany all UK Government interventions of a regulatory nature that affect the private sector, civil society organisations and public services. They apply regardless of whether the regulation originates from a domestic or international source and can accompany primary (Acts etc) and secondary legislation (SIs). An Impact Assessment allows those with an interest in the policy area to understand:
- Why the government is proposing to intervene;
- The main options the government is considering, and which one is preferred;
- How and to what extent new policies may impact on them; and,
- The estimated costs and benefits of proposed measures.
More Resources
Use this menu to access essential accompanying documents and information for this legislation item. Dependent on the legislation item being viewed this may include:
- the original print PDF of the as made version that was used for the print copy
- correction slips
Click 'View More' or select 'More Resources' tab for additional information including:
- lists of changes made by and/or affecting this legislation item
- confers power and blanket amendment details
- all formats of all associated documents
- links to related legislation and further information resources
All content is available under the Open Government Licence v3.0 except where otherwise stated. This site additionally contains content derived from EUR-Lex, reused under the terms of the Commission Decision 2011/833/EU on the reuse of documents from the EU institutions. For more information see the EUR-Lex public statement on re-use.