Annual update of the representative portfolios by EIOPA. On July 1st EIOPA published an update of the representative portfolios that are used in calculating the volatility adjustment (VA) on the risk-free interest rate structure for Solvency II. EIOPA will update these portfolios annually. But while many thought that potential changes would have only a limited impact on the portfolios, this first update actually shows a substantial change. The new representative portfolios therefore have a relatively great impact on the VA and, ultimately, on the solvency position and development of insurance companies as well.


The adjusted portfolios are based on information that has been reported by European (re)insurers to national supervisors in 2015. This implies that the VA portfolios are basically a cross-section of the average investment portfolio of European insurers. From the change in the representative portfolios it can be concluded that insurers have been investing a larger part of their portfolio outside government and corporate bonds. This trend is the logical consequence of the continuous search for yield in the current low interest rate environment. EIOPA therefore indicates that the renewed VA portfolios underlying are a better reflection of the impact of market volatility under the Solvency II framework.

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