Solvency II, the European Commission’s planned reform of prudential regulation for European insurers is well under way. The intention is to revise and extend existing solvency rules in Europe for life, non-life and reinsurers.
Structured around
three pillars, Solvency II will substantially overhaul the way the insurance industry is regulated across Europe. It will be a risk-based, forward-looking regulatory regime founded on a market-consistent approach. Companies will be encouraged and given incentives to run their business with an increased focus on risk, governance and further transparency through disclosure.
The European Commission published its formal draft proposal for a Framework Directive on 10th July 2007. Please see relevant links below:
If all goes according to plan, the Commission expects Solvency II to be implemented no later than 2012.
What’s new:
- CEIOPS has submitted its draft “QIS4 Technical Specifications” for the Solvency II project to the European Commission. The QIS4 testing proposals will be the basis for the new Solvency II impact study that will be launched in April 2008, to measure properly the impact of the future regime on the industry. These specifications have been drafted on the basis of the QIS3 Technical Specifications, taking into account as far as possible feedback received by CEIOPS during the QIS3 exercise and giving particular emphasis on issues that appeared to be of the highest
materiality.
The Commission is consulting on them through its website until the 15th February 2008.
- A Public Hearing is to be held in Brussels on 28 January 2008 in order to provide interested parties with an opportunity to discuss the draft QIS4 specifications. Panel sessions at the Public Hearing will cover the following topics: Groups, SMEs, and the use of internal models.
- CEIOPS has published the results from the Quantitative Impact Study 3 (QIS3) on the 20 November 2007.
- No extra capital required in the European insurance market as a whole.
- Redistribution of capital is expected within the market
- It is estimated that 16% of undertakings would have to raise capital to meet their new Solvency Capital Requirement
- Internal model results showed a significant capital saving.
We have summarised the QIS3 results here. These will help you understand where the regulations are going, and how they are likely to affect you.
Click here to view the CEIOPS Final Report.
- CEIOPS published an Issue Paper to invite stakeholders’ comments on CEIOPS’ proposed way forward regarding its work on Supervisory Reporting and Public Disclosure. Responses must be submitted by 1 February 2008.
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The impact of Solvency II on your business will affect:
- Risk appetite
- Capital allocation/Tax
- Performance improvement
- Market reporting
- Ratings
- Governance
PricewaterhouseCoopers is at the forefront of the current debates and has a
multi jurisdictional team of professionals who are available to assist you with every aspect of your preparations for Solvency II.
