Risk Free Rate (RFR)

For the construction of the representative portfolios government- and corporate bonds are classified according to their reported credit rating or in case lacking: their assumed credit rating. CIC12-classified bonds are supranational bonds issued by supranational organizations, which in general are created by governments of several countries. Due to the (unknown) composite nature of the underlying issuers the credit risk is assumed to be higher than regular government bonds issued by a single country. CIC13/14-classified bonds are Regional government bonds resp. Local authority bonds. The credit risk in these bonds is assumed to be related to the country of issuance. Depending on the assumed credit risk of the issuing country these bonds are either allocated to the government bond portfolio or corporate bond portfolio. It is worth mentioning that in general the exposure to such bonds by insurance undertakings is minimal if at all.