Interest Rate Risk | Actuably

Year	Base Rate (%)	Asset Cash Flow	Liability Cash Flow
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NAV Base

€52 102 459

Discounted under the base curve

NAV Up

€48 888 036

After the upward shock

NAV Down

€54 539 345

After the downward shock

Loss Up

€3 214 422

Base NAV less Up NAV

Loss Down

€-2 436 886

Base NAV less Down NAV

Final SCR

€3 214 422

Max of Up, Down, and zero

Binding Scenario

UP

The upward rate shock produces the binding NAV loss.

Sanity Checks

No denominator-floor protection was needed under the current inputs.

Yield Curve Shock Map

Base curve

Up shock

Down shock

Cash Flow Gap

Positive net gap

Negative net gap

EIOPA Shock Factors

Year	Shock Up	Shock Down
1	70.00%	-75.00%
2	70.00%	-65.00%
3	64.00%	-56.00%
4	59.00%	-50.00%
5	55.00%	-46.00%
6	52.00%	-42.00%
7	49.00%	-39.00%
8	47.00%	-36.00%
9	44.00%	-33.00%
10	42.00%	-31.00%
11	39.00%	-30.00%
12	37.00%	-29.00%
13	35.00%	-28.00%
14	34.00%	-28.00%
15	33.00%	-27.00%
16	31.00%	-28.00%
17	30.00%	-28.00%
18	29.00%	-28.00%
19	27.00%	-29.00%
20	26.00%	-29.00%
21	25.914%	-28.871%
22	25.829%	-28.743%
23	25.743%	-28.614%
24	25.657%	-28.486%
25	25.571%	-28.357%
26	25.486%	-28.229%
27	25.40%	-28.10%
28	25.314%	-27.971%
29	25.229%	-27.843%
30	25.143%	-27.714%
31	25.057%	-27.586%
32	24.971%	-27.457%
33	24.886%	-27.329%
34	24.80%	-27.20%
35	24.714%	-27.071%
36	24.629%	-26.943%
37	24.543%	-26.814%
38	24.457%	-26.686%
39	24.371%	-26.557%
40	24.286%	-26.429%
41	24.20%	-26.30%
42	24.114%	-26.171%
43	24.029%	-26.043%
44	23.943%	-25.914%
45	23.857%	-25.786%
46	23.771%	-25.657%
47	23.686%	-25.529%
48	23.60%	-25.40%
49	23.514%	-25.271%
50	23.429%	-25.143%

1Step 1

Load the base risk-free term structure and projected cash flows

\left\{ y,\ r_y,\ CF^{A}_y,\ CF^{L}_y \right\}_{y=1}^{50}

2Step 2

Apply the Solvency II upward interest-rate stress with the 100 bp minimum increase

r^{\uparrow}_y = \max\left(r_y \times \left(1 + s^{\uparrow}_y\right),\ r_y + 0.01\right)

3Step 3

Apply the Solvency II downward stress, with nil decrease for negative base rates

r^{\downarrow}_y = \begin{cases} r_y, & r_y < 0 \\ r_y \times \left(1 + s^{\downarrow}_y\right), & r_y \ge 0 \end{cases}

4Step 4

Discount each annual asset cash flow under the base, up, and down scenarios

PV^{A,\omega}_y = \frac{CF^{A}_y}{\left(1 + r^{\omega}_y\right)^y}, \quad \omega \in \{\mathrm{base}, \uparrow, \downarrow\}

5Step 5

Discount each annual liability cash flow under the base, up, and down scenarios

PV^{L,\omega}_y = \frac{CF^{L}_y}{\left(1 + r^{\omega}_y\right)^y}, \quad \omega \in \{\mathrm{base}, \uparrow, \downarrow\}

6Step 6

Aggregate the stressed Net Asset Value across the full 50-year horizon

NAV^{\omega} = \sum_{y=1}^{50} PV^{A,\omega}_y - \sum_{y=1}^{50} PV^{L,\omega}_y

7Step 7

Measure the loss in NAV versus the base scenario

Loss_{\uparrow} = NAV^{base} - NAV^{\uparrow}, \qquad Loss_{\downarrow} = NAV^{base} - NAV^{\downarrow}

8Step 8

Take the more adverse loss, floored at zero, as the final capital requirement

SCR_{int} = \max\left(Loss_{\uparrow},\ Loss_{\downarrow},\ 0\right)

Understand the Interest Rate Risk

Overview

This calculator implements the gross capital requirement for the Interest Rate Risk sub-module within the Solvency II standard formula.^[1] The Interest Rate Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from a 1-in-200 year stress event across the more adverse of the prescribed upward and downward yield-curve shocks.^[2]

Input Terms

NAV Base: The net asset value calculated using the initial, unstressed yield curves.
NAV Up Shock: The revalued net asset value following the prescribed upward shift in the yield curve.
NAV Down Shock: The revalued net asset value following the prescribed downward shift in the yield curve.
Shocked Balance Sheet (Up / Down): The revalued assets, technical provisions, and other liabilities used to derive the stressed NAVs under the upward and downward yield-curve scenarios.

Technical Rationale

The Interest Rate Risk sub-module is calibrated to a 99.5% confidence level over a one-year horizon. The calculation measures the sensitivity of the undertaking’s net asset value to adverse shifts in the term structure of interest rates.^[1]

This calculator determines the capital requirement by taking the maximum loss in NAV derived from two distinct scenarios: the Up-shock and the Down-shock. The binding scenario depends on the duration mismatch between assets and liabilities. The goal is to ensure that the undertaking holds sufficient capital to absorb the economic impact of any significant yield-curve shift, regardless of its duration profile. The final result is the gross interest-rate component before diversification in Market Risk.

Important Notes

Rulebook build: The Standard Formula sheet applies the prescribed rate stresses across the full 150-year horizon, uses the greater of the proportional upward shock and `+100 bps`, applies no downward decrease where the base rate is negative, and linearly interpolates missing maturities.
Duration Sensitivity: Upward-rate shocks typically bind for asset-intensive duration profiles, while downward-rate shocks often bind for liability-driven profiles. Accurate asset and liability cash-flow mapping is essential for the valid derivation of the binding scenario.
Look-Through Approach: Per Article 84 of the Delegated Regulation, insurers must "look through" investment funds to the underlying rate-sensitive assets so the shocked balance-sheet views capture the real duration exposure.^[3]
Gross vs. Net SCR: This calculator determines the standalone Interest Rate Risk SCR. Solvency II risk is only finalized as a net impact on Basic Own Funds after diversification in Market Risk, then within BSCR, and after the top-level LAC TP and LACDT adjustments.
Regulatory deviation: Material deviation from standard-formula assumptions at this layer may support a capital add-on or a move toward an internal model where justified.^[4]
Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01 standard-formula reporting view.^[5]

Sources

Year	Base Rate (%)	Asset Cash Flow	Liability Cash Flow
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Year	Base Rate (%)	Asset Cash Flow	Liability Cash Flow
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Year	Base Rate (%)	Asset Cash Flow	Liability Cash Flow
1
2
3
4
5
6
7
8
9
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11
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