Also, a so called counter cyclical premium is being developed – again to allow an adjustment to discount rates to offset excess short-term volatility in certain aspects of the fixed income portfolio.
There are a number of different technical approaches to achieve this end and as ever the devil is in the detail, but the desired outcome is a framework that seeks to square the circle of providing a more risk sensitive solvency framework, while at the same time permitting the continued provision of guaranteed products and avoiding dangerous pro-cyclical effects.