Solvency II

'Solvency II’ is the name of the Directive developed by the European Commission, which will provide a comprehensive new framework for insurance supervision and regulation. It is intended to introduce across the EU a more sophisticated, risk based approach to supervision and capital assessment, using modern techniques for market-based valuation of assets and liabilities.   

Final text of the Solvency II Directive as adopted by the Council on 10 November 2009.

By promoting more sophisticated approaches, including firms’ internal capital models, Solvency II will ensure a more accurate allocation of capital to risk. This should:  

1. Reduce the probability of firm failure; 
2. Increase efficiency in the use of capital, improving returns; and 
3. Achieve a more efficiently priced market for insurance products.  

Solvency II will consolidate many of the existing insurance Directives. A draft of the High-Level Framework Directive was published in July 2007 and an amended text was adopted in 2009 following agreement between the Council of Ministers and the European Parliament. Further to the adoption of the level 1 text, CEIOPS has released in three waves draft implementing measures which the industry has been commenting upon. The ABI’s detailed responses to CEIOPS’ proposals can be found on CEIOPS’ website and summaries to waves 2 and 3 are attached on this page.

The entire framework Solvency II is expected to come into effect in October 2012 and will need to be implemented into national legislation by that time.

More information can be found in the detailed sections of our Solvency II website.