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Solvency II

The Solvency II Directive (pdf 3.62MB) is a European Union (EU) directive for insurance companies. It will direct insurers to ensure that they have enough capital set aside to provide reserve funds to cover all insurance claims that they are likely to receive. 

All insurance companies operating in the EU will have to comply with the Directive when it comes into force.

The Directive has set standards which cover three main areas:

  • valuation of assets/liabilities and capital requirements 
    how insurers value their liabilities (including the money that gets paid to policyholders in the event of a claim) and assets (such as government bonds, shares, property) that they own. The rules also cover the amount of funds insurers need to hold in reserve to make sure they can pay policyholders' claims
  • governance and risk management
    how the structure and management of insurance businesses are governed, enabling insurers to identify, measure, monitor, manage and report risks to which they are exposed. It means that insurers' businesses are managed to a high standard
  • reporting and disclosure
    ensures what information insurers report on their business and how it is reported. Some reports are public and anyone can see them; some are privately reported to the financial regulator. More information allows the public (and the regulator) to understand more about the businesses that provide insurance to individuals and institutions

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