The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) has published an interpretation circular – which explains the requirements for capital market models for the valuation of technical provisions under Solvency II Directive.  The German implementation of the Directive’s provisions can found in s. 74 et seq. Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG). The interpretation circular amalgamates the provisions of Art. 22 (3) Commission Delegated Regulation (EU) 2015/35 regarding the appropriateness of assumptions on future financial market parameters or scenarios. Two of the key elements of the interpretation circular are: (i) the selection of the reference financial instruments and; (ii) the calibration of the capital market model according to the selected reference financial instruments. BaFin also explicitly points out that in relation to the use of capital market models the Guidelines (53 to 60 of the EIOPA Guidelines on the valuation of technical provisions (EIOPA-BoS-14/166 EN)) must be considered together with the interpretation circular.