(1) An insurance undertaking or reinsurance undertaking may, subject to prior approval by the Bank, apply a transitional adjustment to the relevant riskfree interest rate term structure with respect to admissible insurance and reinsurance obligations.
(2) For each currency the adjustment shall be calculated as a portion of the difference between -
(a) the interest rate as determined using the methods used by the insurance undertaking or reinsurance undertaking at 31 December 2015, and
(b) the annual effective rate, calculated as the single discount rate that, where applied to the cash flows of the portfolio of admissible insurance and reinsurance obligations, results in a value that is equal to the value of the best estimate of the portfolio of admissible insurance and reinsurance obligations where the time value of money is taken into account using the relevant risk-free interest rate term structure referred to in Regulation 84(2).
(3) The portion referred to in paragraph (2) shall de
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