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ERM Glossary: Ultimate forward rate

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The ultimate forward rate is an interest rate specified under the EU’s Solvency II Directive, see Article 77a of the Directive. It is the forward interest rate that risk-free interest term structures are assumed to tend towards infinitely far out along the maturity axis. It therefore has a significant influence on how very long term insurance liabilities are valued for Solvency II regulatory capital purposes.

 


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