Regulatory Alerts2022-11-24
Guidance Notice 03/2022 (VA): Costs and Expenses for Solvency II Technical Provisions in Life and Accident Insurance
Germany's Federal Financial Supervisory Authority (BaFin) issued Guidance Notice 03/2022 (VA) for German life and accident insurance undertakings, detailing requirements for taking into account costs and expenses when valuing technical provisions under Solvency II. It mandates that assumptions for expenses, including investment management and inflation, must be undertaking-specific, realistic, objectively determined, and consistently allocated between existing and new business, while also considering future efficiency gains and management actions. The guidance clarifies the reconciliation calculation for investment management expenses and prohibits the inadmissible inclusion of contractual arrangements relating to risk mitigation within technical provisions, emphasizing transparency and separate accounting for such techniques.