‘Credible risk’ that last liquid point for UK risk-free curve could change
Concerns raised over Eiopa’s discretion over methodology
There is a "credible risk" that the last liquid point (LLP) in Solvency II's risk-free term structure for sterling will be changed before the implementation of the new regime, lawyers are warning.
Such a move could have major implications for insurers' interest rate hedging programmes, as it will change the sensitivity of liabilities to interest rate movements.
The LLP for the euro, beyond which an artificial risk-free rate is extrapolated to an ultimate forward rate, was reduced from 30 years
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