There, one achieves a seemingly impossible feat, namely to state that they are to be market consistent, and at the same time to use interest rates that are several hundred basis points over market rates. The end result is a massive prudential understatement of these liabilities and a gross misrepresentation of the solvency position of the firms that sell these contracts.
Establishing close cooperation with supervisors ensures that synergies between these central bank and supervisory activities can be exploited. In addition, close cooperation enhances the efficiency of the supervisory system by reducing overlaps of work. In fact, one lesson from the current crisis is the need for a close interaction between micro- and macroprudential analysis.