Risk Free Rate

Risk Free Rate

The Risk Free rate is considered the interest rate that can be achieved without risk, typically from government bonds.

The actual rate varies depending on maturity and currency. In recent years it has been a low-rate environment in general which is reflected in the latest interest rates too. This low interest rate is generally a challenge for the insurance companies since part of their business model involves investment income.

EIOPA (European Insurance and Occupational Pension Authority) has published the Risk-Free Interest Rate Term Structure as per 30 June 2018. The interest rate is published monthly but special interest is given to the year end rate. Excluding the currency of DKK which had a technical error. The risk-free rate is a vital part of the assumptions used in Solvency II calculations.

Please find the relevant link here.

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