EIOPA updates risk-free rate methodology for 2027 insurance calculations

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EIOPA risk-free rate update 2027

Highlights

EIOPA will implement its updated Risk-Free Rate Technical Documentation for insurance RFR term structure calculations starting 30 January 2027.
The 2026 methodology update incorporates DLT assessment results, refreshed representative portfolios with frozen cash flows, and a tougher currency relevance criterion for Solvency II.
Colombian peso, Hong Kong dollar, and New Taiwan dollar will be removed from the relevant currency list as of 30 January 2027, directly impacting curve construction for insurers in those markets.

Updated methodology and implementation timeline

As reported by EIOPA, the authority has published an updated version of its Risk-Free Rate Technical Documentation that will apply to the calculation of RFR term structures from 30 January 2027.

The revised documentation updates the May 2026 version, which had reflected amendments to the Solvency II Directive and Commission Delegated Regulation (EU) 2015/35 but did not yet include the annual depth, liquidity and transparency assessment or the yearly refresh of representative portfolios. EIOPA said those regular updates are carried out later in the year once the underlying data becomes available.

The current version contains the 2026 DLT assessment results, the 2026 update of representative portfolios, including newly introduced frozen cash flows, the applicable percentage for the euro used as a reference in the residual volume criterion, and a strengthened criterion for assessing the relevance of currencies. Recommended parameters for constructing RFR term structures for all relevant currencies will now be provided separately through an Excel file.

Currency changes and sector impact

The tighter relevance test leads to the removal of the Colombian peso, Hong Kong dollar and New Taiwan dollar from the list of relevant currencies as of 30 January 2027. That change affects how insurers and other undertakings approach curve construction for those markets under the regulatory framework.

To support firms in calculating the curves for those three currencies, EIOPA is also publishing a set of recommended parameters for constructing the corresponding term structures. The update gives regulated firms more detail ahead of the 2027 implementation date and clarifies how the latest annual parameter review feeds into Solvency II risk-free rate calculations across relevant currencies.

Our earlier coverage on sovereign borrowing risks in a higher-rate environment explained how persistent geopolitical tensions and elevated fiscal spending can strain government finances and worsen refinancing conditions. We noted that emerging and frontier markets are particularly exposed because debt-servicing costs tend to be high relative to narrower revenue bases, with inflation shocks (especially in energy and food) adding further pressure to credit outlooks.

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