ERM Glossary: Solvency II

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Solvency II is an updated set of regulatory requirements for insurance firms that came into effect in the European Union on 1 January 2016. It is designed to create a single overarching regulatory framework for insurance within Europe and thus to promote an EU common market in insurance. Like Basel II and Basel III, it aims to be risk sensitive in the capital requirements it places on firms. Solvency II focuses on ‘market consistent’ measurement of assets and liabilities. Sophisticated European insurers are likely to be encouraged under Solvency II to employ internal models to calculate their solvency capital.

For further details on Solvency II, see Nematrian’s Solvency II webpages.

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