EIOPA Confirms RFR Technical Documentation Error in Credit Spread Sensitivity Ratio Calculation for

Key Takeaways

• EIOPA has acknowledged that Section 9.3 of its RFR Technical Documentation does not align with Article 51(a), paragraphs (2) and (3) of the Delegated Regulation, because it omits that assets and liabilities may be discounted using different curves.
• Both the omission and the PVBP presentation will be corrected in the next publication.
• Compliance and actuarial teams should treat the Delegated Regulation as the governing definition when calculating the CSSR for Volatility Adjustment (VA) purposes.

Deep Dive

EIOPA has acknowledged that Section 9.3 of its RFR Technical Documentation does not align with Article 51(a), paragraphs (2) and (3) of the Delegated Regulation, because it omits that assets and liabilities may be discounted using different curves. Both the omission and the PVBP presentation will be corrected in the next publication. Compliance and actuarial teams should treat the Delegated Regulation as the governing definition when calculating the CSSR for Volatility Adjustment (VA) purposes.

On the substance, EIOPA states that using PVBP in both numerator and denominator, or using only the deltas, produces the same result. Firms using the industry PVBP-ratio formulation are therefore not producing a numerically different outcome on that point. EIOPA nonetheless agrees that aligning the documentation with the Delegated Regulation's wording reduces confusion, and it will revise the presentation. The material change is the treatment of discount curves: a CSSR calculation that applies a single curve to both assets and liabilities, as Section 9.3 implies, may not comply with Article 51(a).

No specific implementation deadline is given. The only timeline is that corrections will appear in the "next publication" of the RFR Technical Documentation, with no date announced. Until then, the current documentation contains known errors, and firms should not rely on Section 9.3 alone.

Recommended actions: (1) Review internal CSSR and VA calculation methodologies against Article 51(a)(2) and (3) of the Delegated Regulation, confirming that separate asset and liability discount curves are used where applicable. (2) Document the rationale for any divergence from Section 9.3 in model governance and validation records. (3) Check whether any reconciliations against EIOPA-published figures, vendor tools, or third-party models rely on the flawed single-curve approach. (4) Monitor EIOPA for the updated technical documentation and plan a review when it is released. (5) Brief actuarial, risk, and regulatory reporting stakeholders.

Risk implications are moderate. The main exposure is a misstated CSSR that could affect VA application, solvency calculations, and regulatory reporting accuracy if firms followed the erroneous documentation literally. Because EIOPA has publicly acknowledged the error, firms that continue to use it without justification may face supervisory challenge. Firms already aligned with the Delegated Regulation face minimal impact.

Source: European Insurance and Occupational Pensions Authority