Nematrian Website Pages on Solvency II
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Solvency II (also known as ‘Solvency 2’) is a new regulatory
framework for EU insurers coming into force on 1 January 2016. It derives from Directive
2009/138/EC (‘Solvency II’) as amended by Directive
2014/51/EU (‘Omnibus II’) [a recast version of the Solvency II as at Nov
2014 is available here].
It replaces 14 existing directives (commonly referred to as ‘Solvency I’).
According to the European Commission, it introduces a “modern, harmonised
framework for the taking-up of business and supervision of insurance and reinsurance
undertakings in the Union”. It is a maximum harmonising regime, with three pillars:
Pillar 1: Harmonised
valuation and risk-based capital requirements
Pillar 2: Harmonised
governance and risk management requirements
Pillar 3: Harmonised
supervisory reporting and public disclosure
A high-level overview of the broad structure of the Solvency
II regulatory framework is available here.
Solvency II introduces a new Solvency Capital Requirement
(‘SCR’) and a new Minimum Capital Requirement (‘MCR’) which insurers will need
to satisfy if they are not to be subject to regulatory intervention. Insurers
who believe that the ‘standard formula’ SCR is inappropriate for them can seek
authorisation from the regulator to use an ‘internal model’ instead of the
standard formula.
Solvency II also introduces a wide range of additional
governance requirements (e.g. the requirement for an Own Risk and Solvency
Assessment or ‘ORSA’). Guidance on many of these requirements has been issued
by EIOPA (the EU-wide grouping of insurance regulators).
Nematrian has provided consultancy services to insurers to
help them implement Solvency II and to asset managers to help them help their
insurance company clients, see case studies. The
Nematrian function library contains some tools that can help insurers with
their planning, see Nematrian
Solvency II Tools. If you are looking for further help then please contact us.
Throughout these pages, DA refers to the EU Commission
Delegated Regulation, see here,
which is based on 76 empowerments in the Solvency II Directive.
Version dated 7 December 2015
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