Solvency II R25-Art.77: Arts 77, 77a, 77d, 105a, 109 as amended (from 30 January 2027) Apply the revised valuation, risk margin, volatility adjustment, equity and simplification rules

What does R25-Art.77 require?

The risk margin uses a time-adjusted SCR and a 4.75 percent cost of capital; best estimate methods for contracts with financial options and guarantees must reflect that their value depends on scenarios where outcomes deviate from expectation, with a prudent deterministic valuation allowed for small and non-complex or approved undertakings where the options are not material. The new extrapolation method may be phased in with approval and disclosure of its impact. Volatility adjustment use requires prior approval (existing users may continue if compliant), with a possible undertaking-specific adjustment on approval. A long-term equity investment subset may carry a 22 percent charge where strict conditions are demonstrated (separate management, five-year average holding, no forced sales, diversification), with immediate notification, a one-month plan and six-month cure on breach, else a two and a half year exclusion. Standard formula simplifications follow revised conditions (for small and non-complex undertakings, sub-modules below 2 percent and together below 10 percent of Basic SCR).