The EU has finalised the biggest overhaul of insurance regulation in a decade. This page explains, for investors who already speak rates and credit, what Solvency II is, exactly what changes, where it is written down, and how it reshapes insurer balance sheets — then turns each mechanism into an adjustable model of the EUR hedging flow and the capital it releases.
Solvency II is the EU's rulebook for how much capital insurers must hold. It values their balance sheet at market prices and discounts long-dated liabilities on a regulator-set curve. The 2027 review rewrites four pieces of that machinery at once: how the curve is extrapolated past 20 years, how interest-rate risk is shocked, and two reliefs — the Risk Margin and Volatility Adjustment — plus cheaper capital charges on securitisations and long-term equity.
The combined effect is two-sided. It frees capital — roughly €70–100bn of own funds across the euro-area life sector (lower Risk Margin, richer VA, easier Matching Adjustment) — and it changes what insurers must hedge and hold: regulatory liability sensitivity migrates from the 20-year point out to 25–50 years, forcing a structural ultra-long receiving bid in EUR over 2027–2032, while a new credit-spread test (the CSSR) rewards physical bonds over swaps. Stronger headline solvency, a long-end flow, and an asset rotation into newly cheaper spread paper — all dated, all law.
Live across the EU since 2016, Solvency II marks an insurer's assets and liabilities to market and requires it to hold enough own funds to survive a 1-in-200-year year (a 99.5% one-year VaR — the SCR). Long-dated liabilities are discounted on an EIOPA-published risk-free curve, so the rules that build that curve directly set how rate moves hit capital.
It runs on three pillars: Pillar 1 quantitative capital (SCR / MCR), Pillar 2 governance and own-risk assessment (ORSA), and Pillar 3 public disclosure (the annual SFCR, the source for most numbers on this page). UK insurers now sit under a separate but economically similar Solvency UK; Japan's J-ICS shares the same market-consistent logic.
The review keeps the architecture but recalibrates the parameters that matter most to markets. Each links to its detail tab below:
This is finalised law, not consultation. The hierarchy runs Level 1 Directive → Level 2 Delegated Regulation → EIOPA technical standards:
It frees own funds. A lower Risk Margin, a richer Volatility Adjustment and an easier Matching Adjustment lift own funds by an estimated €70–100bn across euro-area life — raising headline solvency ratios with no new capital raised.
It changes what they hedge. Sensitivity moves off the 20y node to 25–50y, so insurers must receive / own the ultra-long end — a structural EUR 20s/50s flattener phased over 2027–2032.
It changes what they buy. The new CSSR rewards physical bonds over swaps, and far lower charges on CLOs, STS and long-term equity make those the natural home for the freed capital — a cash-over-swaps, into-spread rotation.
Not directly affected: EU pension funds (IORP II, not Solvency II), short-duration P&C / reinsurers, and US insurers (NAIC RBC).
The EU has finalised the Solvency II Review. The amending Directive (EU 2025/2) is Level 1 law, the Level 2 Delegated Regulation was finalised in late 2025, and the changes apply from 30 January 2027. This is now a hard, dated event. Four recalibrations matter for rates: yield-curve extrapolation, the interest-rate capital shock, the Volatility Adjustment, and the Risk Margin. Two parallel regimes — Solvency UK (already live) and Japan's J-ICS / ESR (live now) — run on the same economic-value logic and generate their own long-end flows.
EUR liabilities are discounted with Smith-Wilson extrapolation from a Last Liquid Point at 20y, beyond which the curve is pulled quickly to a fixed Ultimate Forward Rate (~3.3%). So regulatory liability sensitivity is bunched at 20y and moves in market 30y/50y rates barely touch the balance sheet — insurers concentrate hedges at 20y and have little reason to own the ultra-long end.
The review keeps the First Smoothing Point at 20y but blends in a market-based Last Liquid Forward Rate built from forwards out to 25/30/40/50y, with slower convergence to the UFR. The α-parameter is set at 11% for the euro in 2027, tapering linearly to zero by 2032. The regulatory curve stays closer to market rates much further out — so sensitivity migrates off the 20y node and out the curve.
The transition is built so the curve level barely moves on day one, while the sensitivity changes immediately. A second change reinforces the direction: the old rate-capital shock did not shock negative rates downward, so a negative duration gap was nearly free. The new additive-plus-multiplicative shock makes that gap expensive — pushing insurers to extend asset duration and add long receivers.
The new Volatility Adjustment adds an entity-specific Credit Spread Sensitivity Ratio (CSSR) — asset PVBP (bonds, loans, securitisations) over liability PVBP, with swaps and derivatives excluded from the asset side. The VA benefit accrues only to physical spread assets.
→ Long-end duration matching is cheapest with swap receivers, but the CSSR rewards cash long govvies and credit. The likely outcome is a blend — bulk physical duration in long OAT/Bund/BTP and IG credit for the VA uplift, plus swap receivers at 30y–50y for convexity. A marginal shift from swaps toward cash is a long-end swap-spread widener (less negative ASW).
EU life insurers are the forced hedgers — long-duration German, French, Dutch, Belgian, Italian and Nordic books. Trade set: receive/own 25y–50y, redistribute hedges off 20y, close negative duration gaps, prefer physical spread assets to lift the CSSR, add senior securitisation. The Risk Margin cut (cost-of-capital 6%→4.75% plus a time-dependent taper) releases capital, sized by the sell-side at roughly €30bn net once the curve and shock increases are netted off. The new euro-area macro-VA is a quiet support for BTP.
P&C / non-life and reinsurers: short duration, largely untouched by extrapolation; minor rates footprint. EU pension funds: a key clarification — they sit under IORP II, not Solvency II, so this review does not hit them directly. The linkage is indirect (UK DB buyouts feed insurer balance sheets; Dutch pension reform is a counter-flow of EUR ultra-long receiver unwinds that partly offsets the insurer bid).
Hedge funds / RV are the anticipators: position for 20s/50s flattening, front-run the 2027–2032 phase-in during 2026, and play the swap-spread consequence of the cash tilt. Banks warehouse the receiving, structure CSSR/MA-efficient assets, and benefit from the securitisation revival (lower senior-STS spread charges). PE-backed Bermuda / US consolidators (Apollo-Athene, KKR-Global Atlantic, Brookfield) arbitrage the regime gap — buying and reinsuring the long-dated guarantees that are punitive under Solvency II and J-ICS via asset-intensive reinsurance.
UK runs ahead on a separate track: the risk-margin cut took effect at year-end 2023, the Matching Adjustment reform on 30 June 2024 (eligibility widened to "highly predictable" cashflows, sub-IG cap removed). The dominant GBP driver is the bulk-annuity boom — and because the MA requires physical cashflow-matching, it is structural real-money demand for long gilts, linkers and credit, executed in cash, not swaps.
Japan (J-ICS / ESR) applies from the fiscal year ending 31 March 2026: assets and liabilities marked to market, last observable term 30y, UFR 3.8%, mass-lapse risk added. A move in the 30–40y point now reprices the whole balance sheet, anchoring structural super-long JGB demand. US domestic insurers run on NAIC RBC (not market-consistent), so no Solvency-II-style forced receiving; the connection is the EU–US covered agreement and the Bermuda/PE channel that absorbs migrating long-dated books.
The reform is dated and partly already live. Below: the UK and Japan moves that came first, the EU law now locked, and the phased EU go-live still ahead. Colour marks jurisdiction; the highlighted nodes are the events that re-price balance sheets.
The extrapolation change above, made visible. Current = Smith-Wilson (retiring); new = the alternative extrapolation method (applies 30 Jan 2027). Paste par swap rates (Bloomberg/Refinitiv) or zero rates; the tool strips the CRA, bootstraps zeros, and runs both methods live. It is seeded with EIOPA's own worked EUR example, and every curve here reproduces EIOPA's published numbers to ≤ 0.05 bp. Edit the 25–50y rates to move the new curve while the current one stays fixed — that 50y gap is exactly the post-20y sensitivity migration the §04 flow model monetises.
| maturity | par swap rate (%) |
|---|
Set the balance-sheet assumptions on the left. The model takes the sector's general-account EUR life liabilities, isolates the DV01 sitting beyond the 20y smoothing point, and tracks how the α-taper re-sensitises that DV01 into market tenors year by year — the forced new receiving flow.
Defaults seeded from EIOPA / ECB aggregates. Override with your own desk numbers.
As α tapers, the beyond-20y DV01 (parked at 20y under the old curve) redistributes into 25/30/40/50y. The blue mass is what moves — and must be re-hedged out the curve.
Annual increment (bars) and running cumulative (line) as the α-taper builds toward full convergence in 2032.
The CSSR rewards physical bonds, not swaps. Split the forced flow between cash and swap execution and see the directional pressure on the EUR long-end swap spread. Sign logic: buying cash bonds pushes bond yields down → spread widens (less negative); receiving in swaps pushes swap rates down → spread tightens (more negative).
Betas are illustrative direction/scale, not calibrated estimates. Tune to your own desk view.
Net of the cash widener and swap tightener applied to the cumulative forced flow. Above zero = swap spread richening / less negative.
The sector aggregates that anchor the model come from regulatory statistics — which themselves aggregate the Solvency & Financial Condition Reports (SFCRs) every EU insurer files publicly. The figures below are the seed defaults; the model lets you replace any of them.
| Aggregate (latest public) | Value | Source |
|---|---|---|
| EEA insurers — total assets, 2024 | > €10.0 tn | EIOPA EP statement, Nov 2025 |
| Euro-area insurers — total technical reserves | €5.9 tn | ECB ICB statistics |
| — of which life (≈88% of reserves) | ≈ €5.2 tn | ECB ICB statistics |
| — of which unit-linked (policyholder bears risk) | ≈ €1.5 tn | ECB ICB statistics |
| General-account life TP (model base) | ≈ €3.7 tn | life − unit-linked |
| Bonds — share of insurer investment book | ≈ 50% | EIOPA insurance statistics (2024) |
| EEA IORPs (pensions, under IORP II — not in scope) | ≈ €2.7–3.0 tn | EIOPA IORP factsheet, 2024 |
The live calculation chain below uses your current inputs from §04; each step is the model's actual arithmetic. The grey note under each line records where its default anchor comes from — so you can see what's a published figure and what's a stylised assumption to override.
To refine beyond sector aggregates, the public sources that carry the needed detail are: (1) SFCRs — every insurer's annual public regulatory filing, including the value of technical provisions, the LTG-measures impact (VA / MA / transitionals) and, for many, liability duration and interest-rate sensitivity; (2) EIOPA's Long-Term Guarantees report and the European Insurance Overview — aggregated VA/MA usage and balance-sheet detail; (3) group annual reports & IFRS 17 disclosures — Allianz, AXA, Generali, Aviva, Legal & General, NN, Aegon, Phoenix publish duration, hedge ratios and interest-rate sensitivities in their risk notes; (4) EIOPA stress-test results — modified duration of assets vs liabilities by country. Replacing the sector duration and >20y-tail assumptions with a weighted read of the large long-duration writers is the single highest-value refinement.
This is a scenario engine, not a forecast. The flow is an order-of-magnitude framework built on transparent, adjustable assumptions. Real outcomes are highly heterogeneous across insurers (duration, asset mix, internal model vs standard formula, transitional measures) and the published curves cannot simply be read off — firms must implement the new method themselves.
The swap-spread module shows direction and relative scale under your own elasticity inputs; actual swap-spread moves also depend on dealer balance sheets, repo/collateral, and net govvie supply, which this tool does not model. Whether long-end yields fall depends on this regulatory bid versus heavy EUR/GBP long supply in 2027+. Nothing here is investment advice.
Pulled from the major European life writers' public disclosures, with a running tally of how much of the eurozone life market we've captured. What's reliably public: Solvency ratio, own funds, and — for the big bancassurers — life technical provisions or AUM. What mostly isn't: precise liability duration and the >20y DV01 split, which firms rarely disclose at that granularity. So the sector engine (§04) remains the right tool for the aggregate flow; this section grounds its inputs and tracks coverage. Toggle the region and click a column to sort.
How much of the eurozone life market the named groups represent. "Hard" = figures anchored to disclosed accounts — SFCR technical provisions, life AUM, or IFRS insurance-contract / balance-sheet liability totals (for multinationals, the euro-area-life slice is derived from the disclosed group total; see Method). "With estimates" adds groups sized from AUM, CSM or market position. Denominator is ECB euro-area life technical reserves (≈€5.2tn).
| Insurer ▾ | Base | SII FY24 | SII FY25 | Life size | Basis | Rate-flow relevance |
|---|
The EUR long-duration core is concentrated — and now largely on hard numbers. The three biggest groups' liability stacks are read straight from disclosed accounts: Allianz L/H insurance-contract liabilities €688bn globally (≈€490bn euro-area), AXA insurance + investment-contract liabilities €489.6bn group (≈€300bn euro-area life once P&C, Health and Japan/HK/AXA XL are stripped), and Generali ≈€505bn total liabilities / €30.3bn Life CSM (≈€355bn euro-area life). Add CNP's €344.9bn of SFCR technical provisions — the largest single long-duration EUR savings book — plus the French bancassurers (Crédit Agricole/Predica €347bn, BNP Cardif €287bn) and a handful of groups hold the bulk of the rate-relevant ultra-long DV01.
Hedging posture varies sharply. AXA discloses limited rate sensitivity (well-hedged, roughly −5pts per −50bp on its older basis, since reduced). Generali's SFCR, by contrast, flags rising rate and credit SCR on a downward yield-curve move — genuine downside-to-lower-rates exposure. Dutch writers (NN) hedge heavily with swaps, which is exactly the posture the new CSSR penalises relative to physical bonds.
The UK is already executing the thesis in cash. KPMG's year-end review notes UK insurers increasing gilt allocations for capital efficiency and redeploying into private credit and infrastructure — physical long-end buying, because the Matching Adjustment rewards cashflow-matching assets, not swaps. FY25 annuity new business (PVNBP) ran at roughly £4–13bn per writer (L&G £13bn, PIC £6.8bn, Aviva £6.2bn, Rothesay £5.2bn, Standard Life £5.1bn, Just £4.3bn).
On sensitivities and the >20y split. Firms rarely publish the >20y DV01 directly, but the fragments that exist are consistent and usable: AXA discloses ≈−5pts/−50bp (well-hedged), Just −4% on rising long rates, and the standard EUR life duration sits near 11–13y. The honest path is what this tool does — extrapolate from the captured ~three-quarters of the market via the §04 engine rather than imply a precision the disclosures don't support. As coverage rises, the aggregate duration and tail assumptions can be re-weighted toward the actual large writers.
The captured euro-area life groups account for the large majority of the €5.2tn euro-area life market — and the long-duration savings books concentrated in France, Italy, Germany and the Netherlands are exactly the balance sheets where the extrapolation change bites. Applying the §04 duration and >20y-tail assumptions to the captured base reproduces the sector DV01 from the bottom up, which is how the named-insurer data and the aggregate engine reconcile.
Sections 03–07 trace the rates half of the review — the extrapolation change and the long-end hedging flow it forces. This section covers the capital half the headlines miss: the same reform frees own funds (Risk Margin, Volatility Adjustment, Matching Adjustment) and redirects it (securitisation and long-term-equity charge cuts). Freed capital chasing newly-cheaper assets is the demand-side complement to the cash-over-swaps tilt in §05. Start on Summary; the per-factor tabs go deeper; the last tab is a live RM + VA relief calculator on the §07 insurer book.
Seven Level-1/Level-2 levers, what each does, where it bites, and a rough first-order impact. Everything applies 30 January 2027 unless flagged otherwise. Figures are order-of-magnitude; the calculator tab quantifies RM + VA on the actual insurer book.
| Lever | What changes | Where it bites | Rough impact | When |
|---|---|---|---|---|
| Extrapolation (AM)↳ §03 | Market-based LLFR from 20/25/30/40/50y forwards replaces the fast pull to UFR; α tapers 11%→0 by 2032. | Long-dated (>20y) life liabilities. | Re-sensitises long-end DV01 — the forced receiving flow (§04). | 2027→2032 |
| Interest-rate shock↳ §04 | New additive-plus-multiplicative shock that also stresses low/negative rates downward. | Negative asset-liability duration gaps. | Makes the gap expensive — pushes asset-duration extension & long receivers. | 2027 |
| Risk Margin↳ tab | Cost-of-capital 6%→4.75% (Directive) plus a time-dependent decay factor (λ=0.96, floored at 0.5 after 17y). | Long-tail life & annuity reserves. | RM ≈ −21%+, releases own funds; ~€35–50bn sector est., skewed long-duration. | 2027 |
| Volatility Adjustment↳ tab | General application ratio 65%→85%; re-engineered to trigger only in genuine spread stress. | Spread-asset-backed savings books (BTP, OAT, IG credit). | Higher VA pass-through; OF uplift ≈ duration × ΔVA × eligible TP (~€5–6bn per +1bp sector-wide). | 2027 |
| Matching Adjustment↳ tab | Eligibility widened; diversification restriction inside the MA removed. | Annuity / MA books — mainly Spain in the euro area; large in the UK. | Modest for the euro area; material UK/Spain. Cash long-credit demand. | UK 2024 EU 2027 |
| Securitisation charges↳ tab | Senior STS aligned to covered bonds; senior non-STS (CLOs) gets a new, far lower factor set. | Asset side — new allocations. | AAA CLO 3y: 37.5%→8.1%; 5y AAA STS ≈0.70%/yr. Unlocks the asset class. | 2027 |
| Long-term equity↳ §09 | Simplified eligibility for the preferential 22% equity charge; new treatment for legislative-programme equity. | Equity / private-equity allocations. | Frees equity capacity — a redeployment channel for the capital RM/VA release. | 2027 |
The review is not only a rates event. It simultaneously releases own funds (RM cut + richer VA + easier MA) and lowers the capital price of the assets insurers would redeploy into (senior securitisation/CLOs, long-term equity). → Expect freed capital to rotate toward higher-yielding spread and structured assets, reinforcing the physical-bond / cash-over-swaps tilt the CSSR already rewards (§05).
Sources: EC Q&A on the SII Delegated Regulation (29 Oct 2025) · Delegated Regulation C(2025) 7206 · Directive (EU) 2025/2 · Orrick (securitisation charges).
The Risk Margin sits inside technical provisions; cutting it lifts the excess of assets over liabilities one-for-one into own funds. Two changes stack. First, Directive (EU) 2025/2 cuts the cost-of-capital rate from 6% to 4.75%. Second, the Delegated Regulation adds a time-dependent decay factor (λ = 0.96, applied as λt, floored at 0.5 after ~17 years) that lowers the margin and — critically — its interest-rate sensitivity for long-dated business. The Commission's own framing puts the combined reduction at roughly 21%+.
The decay factor bites hardest on distant projection years, so the relief is concentrated in long-tail savings and annuity reserves — exactly the French, Italian, German and Dutch books that dominate §07. A flatter, less rate-sensitive RM also makes the whole balance sheet steadier, which is the stated point: less procyclicality, more room to hold long assets.
Directly. RM relief per insurer ≈ life TP × (RM as % of TP) × (RM reduction %). With RM at ~4% of TP and a ~25% cut, the captured euro-area book throws off tens of €bn of own funds — see the calculator tab. The honest gap: RM-as-%-of-TP varies by product and isn't disclosed uniformly, so it's a tunable assumption, not a read-off.
Sources: Directive (EU) 2025/2 · Delegated Regulation C(2025) 7206 · EC Q&A (29 Oct 2025).
The VA adds a slice of the spread earned on assets to the discount rate, damping the solvency hit when spreads gap wider. The review lifts the general application ratio from 65% to 85%, so more of the reference spread passes through, and re-engineers the formula (new risk-correction / macro component) so the VA is triggered by genuine market stress rather than by slow, fundamentals-driven repricing. Net effect in normal times: a higher discount rate, lower liabilities, more own funds.
Own-funds uplift ≈ Δ(VA in bp) × liability duration × VA-eligible TP. At the sector default duration of ~11y, each +1bp of VA is worth ≈0.11% of liabilities — about €5–6bn across the €5.2tn euro-area life book. So a modest +10bp from the GAR change is ~€50bn of own funds sector-wide. The caveat cuts both ways: at today's tight spreads the current VA is small, so the realised benefit depends on where spreads sit when the regime goes live.
Books with large spread-asset portfolios and long duration — Italian BTP-heavy savings (Poste Vita, Generali, Intesa Vita) and the big French general accounts. Swap-hedged Dutch writers (NN) gain less on the VA axis precisely because derivatives are excluded from the CSSR asset side (§01).
Sources: Directive (EU) 2025/2 · EC Q&A (29 Oct 2025) · EIOPA RFR & VA technical documentation.
The MA lets an insurer holding a cashflow-matched fixed-income portfolio to maturity discount the matched liabilities at a higher rate, on the logic that buy-and-hold investors are not exposed to mark-to-market spread swings. The review improves its functioning and removes restrictions on diversification benefits within the MA, reducing operational drag.
MA take-up on the continent is concentrated — chiefly Spanish annuity books — while the large French/Italian/German savings books run on the VA, not the MA. The dominant MA story is the UK, where the reform landed earlier (30 June 2024: eligibility widened to "highly predictable" cashflows, the sub-investment-grade cap removed) and underpins the bulk-annuity boom in physical long gilts, linkers and credit.
Only for the MA-using subset, which our euro-area dataset captures thinly (Mapfre and parts of multinationals). We flag it qualitatively rather than forcing a sector number the data can't support; the UK names in §07 are where the MA capital effect is real and visible.
Sources: EC Q&A (29 Oct 2025) · PRA / Solvency UK (MA reform).
Aligned with the June 2025 securitisation package, the Delegated Regulation cuts Solvency II spread-risk charges hard. Senior STS tranches are aligned to covered bonds (≈0.70%/yr for a 5y AAA), compressing the delta that kept insurers out. The headline winner is senior non-STS — i.e. CLOs: a AAA CLO tranche at 3y modified duration falls from 37.5% to 8.1% spread SCR. That is the difference between uninvestable and competitive on a capital-adjusted-yield basis, and is precisely the AAA-CLO case the sell-side (e.g. Barings) is making.
Programs like SPIRE are synthetic significant-risk-transfer (SRT) platforms: the insurer typically sells protection on a bank loan book by taking the mezzanine/junior tranche. The recalibration cut non-senior factors only proportionally — the dramatic repricing is in senior cash CLO/STS, not the typical SRT mezz trade. SPIRE-type structures benefit more from the policy direction (the Commission explicitly wants bank→insurer credit-risk transfer) than from the headline senior number. So: expect strong insurer appetite for senior CLO/STS paper, and a more selective, yield-driven bid for SRT mezzanine.
The asset side is no longer a black box. A pull of EIOPA Insurance Statistics (solo quarterly, 2025 Q2, data/asset_exposure.json) gives the holdings directly. Per-insurer line items (supervisory S.06.02) stay confidential, but the EEA aggregate and the country layer are hard data, and we apportion them onto the §07 names by domicile intensity. The headline is stark: true securitisation positions are tiny and have not grown. CIC 6 "collateralised securities" (ABS/MBS/CLO) is just €35.4bn across the whole EEA — 0.4% of €9.43tn investments — and has sat flat near €31–35bn since 2023 while generic CIC 5 structured notes (mostly French retail equity/rate wrappers, not securitisations) grew €167bn→€220bn. That flat line is the empirical fingerprint of an asset class kept uninvestable by the old capital charge.
| EIOPA 2025 Q2 | €bn | % of investments | read |
|---|---|---|---|
| CIC 6 collateralised securities (ABS/MBS/CLO) | 35.4 | 0.4% | securitisation proper — flat since 2023 |
| + CIC 5.4 credit-risk structured notes | 19.1 | 0.2% | generous ceiling ≈ €54bn |
| CIC 5 structured notes (all) | 219.8 | 2.3% | mostly retail wrappers, not ABS/CLO |
| Total EEA investments | 9,426 | 100% | govt 19% · corp 18% · funds 36% · equity 16% |
By domicile, true securitisation (CIC 6) intensity is highest in the Netherlands (1.68%, Dutch RMBS) and lowest in the big savings books — France 0.28%, Italy 0.21%, Germany 0.35%. France's headline 5.3% "structured" is CIC 5 retail paper, not CLOs. Apportioned onto the mapped §07 names, the captured euro-area book (≈€2.34tn general account) currently holds only ≈€8.6bn of securitisation and ≈€72bn of broader structured notes. The redeployment headroom is the story: a 1–2% rotation of the €5.2tn euro-area life book into senior CLO/STS is €52–104bn — enough to 1.5–3× the entire EEA securitisation book if even part of the freed RM/VA capital chases the new capital-adjusted yield. The reallocation overlay is no longer a blind assumption; it is sized against a measured €35bn starting point.
The 2027 Volatility-Adjustment reform reaches into how a SPIRE-style secured note (foreign government bond + cross-currency swap) is best reported. The worked €/notional economics below decompose the spread SCR, the swap counterparty/currency SCR and the new CSSR mechanism — and show why look-through flips from a no-brainer into a genuine trade-off.
Worked model → Does the "look-through" still pay? Look-through vs structured-note treatment of a cross-currency repackaging note, with the post-2027 crossover chart. ↗Sources: Orrick · Macfarlanes · EC securitisation package (Jun 2025) · Barings (AAA CLO case) · EIOPA Insurance Statistics (asset exposures, 2025 Q2).
A live estimate of the own-funds released by the Risk Margin cut and the richer Volatility Adjustment, applied to the captured euro-area life book from §07. Set the assumptions on the left; the table recomputes per insurer. Own-funds uplift is the robust output; the solvency-ratio points use an SCR-as-%-of-TP proxy (we don't have per-insurer SCR), so treat the ratio columns as indicative.
Defaults from the EC Q&A framing; override with your own actuarial read.
Sorted by total own-funds uplift. RM relief = TP × RM% × cut. VA relief = TP × eligible% × duration × ΔVA. Ratio points = uplift ÷ (SCR proxy), added to the latest disclosed Solvency II ratio. Note: because the SCR proxy scales with TP, the Δ-pts figure is the same for every insurer under the flat assumption — the differentiation you see is in the €bn uplift (driven by book size) and the new ratio (driven by each firm's starting point). True per-insurer Δ-pts needs disclosed SCR. "n/d" where no ratio is published.
| Insurer | Life TP €bn | RM relief | VA relief | OF uplift | SII ratio | Δ pts (est) | New ratio (est) |
|---|
Own-funds figures are the dependable output; they rest only on disclosed liability size and two tunable percentages. The ratio columns are indicative — they divide the uplift by an assumed SCR-as-%-of-TP because per-insurer SCR and own-funds levels aren't in this dataset. Internal-model firms, transitional measures and product mix make real outcomes heterogeneous. Not investment advice.
Shock the equity market (simplified to S&P 500 and EuroStoxx 50) and trace it through four channels: the own-funds & solvency-ratio hit, the de-risking bond demand it forces, the incremental long-end receiving from the risk-off rates rally, and the VA offset as credit spreads widen. Important caveat: our dataset is liability-only — there is no per-insurer asset side. So the equity exposure here is a sector assumption you set, seeded from EIOPA aggregates, not a bottom-up read. Only general-account equity hits own funds; unit-linked equity losses fall on policyholders and are excluded.
Euro-area insurer general-account investments are bond-dominated — roughly ~42% government + ~18% corporate ≈ 60% bonds. Direct equity is a modest single-digit share; much "equity" sits inside collective investment funds (visible only on look-through) and inside unit-linked, where the policyholder bears the risk. The general-account equity that actually dents solvency is plausibly ~5–8% of GA assets ≈ €250–450bn across the €5.2tn book. → True per-insurer and by-index (S&P vs EuroStoxx) granularity needs SFCR template S.06.02 + S.06.03 fund look-through, which we have not pulled.
Equity € is a sector assumption (no asset-side data). Defaults seeded from EIOPA aggregates.
Equity mark-to-market loss, partly offset by the richer VA as spreads widen, plus the OF cost of the risk-off rates rally on the unhedged gap → net own-funds impact.
De-risking generates physical bond-buying; the rates rally generates incremental long-end receiving (executable in swaps or — given the CSSR — in cash, adding further to bond demand).
What the SFCRs actually show for the mapped euro groups (the S.06.02 "list of assets" is supervisory-only, so this is built from the public S.02.01 balance sheet + group disclosures). The finding: direct general-account equity is small — near-zero for German life — and the larger equity beta hides in Collective Investment Undertakings (funds), which no public SFCR looks through. Set the assumed equity-content of funds and the US share, then seed the shock above.
| Insurer | Entity / basis | GA inv €bn | Direct eq €bn | eq %GA | CIU €bn | conf |
|---|
Stylised, now part-seeded from filings. The shock sliders default to the bottom-up direct general-account equity from the S.02.01 pull (euro-area-scaled), which is modest — most equity beta sits in funds (CIU) with no public look-through, and the US/EU split is disclosed nowhere (it lives in supervisory S.06.02). The VA offset and symmetric-adjustment dampener are exactly the stabilisers the framework is designed to provide, so a near-flat ratio alongside large gross flows is realistic, not an error. Internal models, hedging and product mix make real outcomes heterogeneous. Not investment advice.
Sources: EIOPA insurance statistics (asset allocation) · EIOPA asset-allocation visual · Milliman (symmetric adjustment) · SII Delegated Regulation 2015/35 arts. 168–172 (equity risk & dampener).
Total liability DV01 = TP × ModDur × 1bp. Beyond-20y DV01 = total × tail-share. The α-parameter runs linearly 11%→0% across 2027–2032; market-sensitivity is interpolated linearly between the α=11% and α=0% endpoints you set. Newly-sensitive DV01 in year t = beyond-20y × (sensitivity(t) − old-curve sensitivity). Forced new hedging = newly-sensitive × unhedged share. Notional-equivalent = forced DV01 ÷ (DV01 per €1m at execution tenor).
The cumulative forced notional is split cash/swap by your slider. Cumulative swap-spread drift(t) = (cash notionalₜ ÷ 100bn) × β-cash − (swap notionalₜ ÷ 100bn) × β-swap, in bp versus a 2026 baseline. Positive = widening / richening (less negative ASW). Betas are stylised elasticities representing the marginal price impact of the cash-vs-swap execution choice, isolated from supply and balance-sheet effects.
Group-level liability totals are taken directly from disclosed accounts and carry high certainty: Allianz L/H insurance-contract liabilities €688bn (financial supplement, IFRS); AXA insurance + investment-contract liabilities €489.6bn (HY25 report, FY24 balance sheet); Generali total liabilities ≈€505bn with €30.3bn Life CSM; CNP SFCR TP €344.9bn. The euro-area-life figure used in coverage is then derived from each group total by stripping non-life lines and non-euro geographies (US/Asia for Allianz; P&C, Health, Japan/HK and AXA XL for AXA). That allocation is the estimated layer — exact group anchors, modelled euro-area slice. Generali and CNP map most cleanly (predominantly European life); AXA carries the widest allocation band. The large German writers (R+V, Talanx, ERGO, Debeka) remain estimates, but several have now been refined from each life entity's own SFCR: the exact technical-provision line sits in template S.02.01 around page 54 of these filings — too deep for automated retrieval — but the front sections disclose enough (investment income with the Verbandsformel yield, or the administrative-cost ratio on mean investments) to back out general-account investments and approximate the reserve. This exercise corrected R+V down from €95bn to ≈€78bn and ERGO from €140bn (which had conflated the DKV health book) to ≈€60bn, and suggests Talanx's €120bn is also high. These stay flagged as estimates pending the exact S.02.01 line or, for the fragmented Talanx book, the group IFRS 17 "Retail Germany – Leben" segment subtotal. Debeka's site blocks automated access, so it awaits a manual pull of the HGB Deckungsrückstellung.
Per insurer, on the captured euro-area life book: Risk-Margin relief = TP × (RM as % of TP) × (RM reduction %), flowing one-for-one into own funds because the Risk Margin is a component of technical provisions. VA relief = TP × (VA-eligible %) × duration × Δ(VA in bp) × 10⁻⁴, the first-order PV gain from a higher discount rate. Total own-funds uplift is their sum. Solvency-ratio points = uplift ÷ (SCR proxy), where SCR is proxied as a % of TP because per-insurer SCR is not in the dataset — these ratio columns are explicitly indicative, added to the latest disclosed Solvency II ratio. The sector "scaled to €5.2tn" figure grosses the captured total up by €5.2tn ÷ captured TP. Defaults (RM 4% of TP, −25% cut, +10bp VA, 11y duration, 90% eligible, SCR 8% of TP) follow the EC Q&A framing and are all override-able; own-funds outputs are robust, ratio outputs are scenario-only.