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Market Consistency and WMC [15]

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Bullet points include: The EU’s Solvency II (introduced 1 Jan 2015) insurance regulatory framework explicitly aims to be market consistent. Previous EU regulatory frameworks not harmonised across member states, and valuations of liabilities (‘technical provisions’) in some cases focused more on a smooth emergence of surplus. Some areas less market consistent than other areas. E.g. Transitional measures. And identifying what is a market consistent value is not always trivial for some insurance liabilities. E.g. very long-term liabilities may extend beyond what is practically observable. Solvency II mandates an “Ultimate Forward Rate”

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