While these measures help deal with front book problems (and would therefore accommodate a more conservative and market consistent valuation approach under Solvency II), it is clear that back books of VA and guaranteed business are likely exposed to a long period of low interest rates.
These back book risks could also be amplified by adverse trends in terms of surrenders and longevity, causing a build-up of solvency problems. The Central Bank believes that the most effective way to assess these back book risks is through robust stress testing and we plan to roll out such stress tests with those firms that have potentially vulnerable back books.