French Insurance Code
In forceI.-In each currency, the calculation of the adjustment referred to in Article L. 351-4 corresponds to a fraction of the difference between:
1° the interest rate determined by the insurance or reinsurance undertaking in accordance with the provisions in force at 31 December 2015; and
2° The effective annual rate, calculated as the single discount rate which, if applied to the cash flows of the portfolio of eligible insurance and reinsurance commitments, would give a value equal to the value of the best estimate of the portfolio of eligible insurance and reinsurance commitments for which the time value of money is taken into account by following the relevant risk-free interest rate curve mentioned in Article R. 351-2.
The fraction referred to in the first paragraph decreases linearly at the end of each year, from 100% at 1 January 2016 to 0% at 1 January 2032.
When insurance and reinsurance undertakings apply the volatility adjustment referred to in Article R. 351-6, the relevant risk-free interest rate curve referred to in 2° is the relevant risk-free interest rate curve defined in Article R. 351-6.
II.- Eligible insurance and reinsurance commitments are those that meet the following requirements:
a) The contracts giving rise to the insurance and reinsurance commitments were entered into before 1 January 2016, with the exception of contract renewals carried out on or after that date;
b) Until 31 December 2015, the technical provisions established for insurance and reinsurance commitments were determined in accordance with the provisions in force at 31 December 2015;
c) Article R. 351-4 is not applied to insurance and reinsurance commitments.
III- Insurance and reinsurance undertakings which apply the measures provided for in Article L. 351-4:
a) Do not apply Article L. 351-5 ;
b) Indicate, in the report on their solvency and financial situation mentioned in Article L. 355-5, that they are applying the transitional risk-free interest rate curve and quantify the impact that the decision not to apply this transitional measure would have on their financial situation.
IV - Insurance and reinsurance undertakings which, subject to the prior approval of the Autorité de contrôle prudentiel et de résolution, apply the adjustment referred to in I after 1 January 2016 may use the fraction referred to in I, which is calculated in the same way as if the adjustment had been applied as from 1 January 2016.
V.-The Autorité de contrôle prudentiel et de résolution will decide on the adjustment referred to in this article within three months.
