Solvency II — Advice for Insurers on the EU Directive

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Solvency II

Solvency II represents both a challenge and an opportunity for European insurers. The implementation of Solvency II should not be seen purely as a compliance exercise, but instead a tremendous opportunity to improve business performance. The greatest competitive advantage will be achieved by those firms that position themselves early to take advantage of the coming regulatory change.

The Solvency II project was initiated by the European Commission (EC) in 2000 to implement a fundamental change to the current capital adequacy regime for European insurers. It is intended that Solvency II will produce a more harmonised, risk-orientated solvency regime across insurers and across the European region whilst also resulting in capital requirements that are more reflective of the risks being run by insurers.

After intense negotiations, the European Parliament and Council have finally reached agreement with the Solvency II Framework Directive officially adopted in April 2009. With the Level 1 Directive text finalised, attention has now turned in earnest to the Level 2 implementing measures, with large volumes of draft advice being consulted on by CEIOPS throughout the year. Insurers now have a clear deadline to prepare for Solvency II with the implementation date set for 2012. Looking ahead, Quantitative Impact Study (QIS) 5 is expected to take place from August to October 2010 and will most likely test the emerging views on the Level 2 measures.

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