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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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