The above table shows the outcomes of the annual DLT assessments for PRA relevant currencies, as conducted by the PRA in September 2021. The DLT assessments were carried out in accordance with the Statement of Policy ‘The PRA’s approach to the publication of Solvency II technical information’, using aggregated swap data from the EMIR Trade Repositories dataset up to and including August 2021. The table is also available in JPG format.
Our DLT conclusions also include the following considerations:
The DLT status of Sterling Overnight Index Average (SONIA) overnight index swaps (OIS) has been evaluated in the context of the transition from GBP Libor, as was set out in the initial DLT assessment of the SONIA OIS market.
The PRA considered Recital 21 of the onshored Solvency II Delegated Regulation and EIOPA’s DLT conclusion when determining the 20-year Last Liquid Point (LLP) for the EUR RFR.
In the absence of an active swap market in an alternative RFR at longer tenors, the RFRs for JPY will be based on Japanese government bonds from January 2022. When determining the DLT maturities for JPY, the PRA considered the judgement of the International Association of Insurance Supervisors that, for the Insurance Capital Standard Technical Specification, the Last Observed Term (which is an equivalent concept to the Last Liquid Point) for JPY should be 30 years.
The EMIR Trade Repositories data set only includes a relatively small amount of AUD Libor trades. Therefore, the trades were scaled using a scaling factor, derived from the triannual OTC derivative statistics of the Bank for International Settlements.
Comparing swap data for the year up to August 2021 against the volume thresholds in the SoP has led to the LLP for USD reducing from 50 to 30 years. A reduced level of liquidity for USD Libor at longer maturities was expected, given initiatives to encourage liquidity to shift from USD Libor to the Secured Overnight Financing Rate (SOFR). The PRA continues to monitor SOFR liquidity in the context of preparing for the future transition of the USD RFR from Libor to SOFR.