(1) When calculating technical provisions, an insurance undertaking or reinsurance undertaking shall take account of the value of financial guarantees and any contractual options included in insurance and reinsurance policies.

(2) Any assumptions made by an undertaking with respect to the likelihood that policy holders will exercise contractual options, including lapses and surrenders -

(a) shall be realistic and based on current and credible information, and

(b) shall take account, either explicitly or implicitly, of the impact that future changes in financial and non-financial conditions may have on the exercise of those options.