The Chartered Insurance Institute recognises its members need
for information on Solvency II as it's a new piece of regulation
with far reaching consequences that will have a significant impact
on insurers. To ensure members receive the right information, the
CII has teamed up with PricewaterhouseCoopers to provide specialist
What is it?
Solvency II is the long planned overhaul of prudential
regulation for European insurers which is due to come into
operation across Europe on 31 October 2012. It will significantly
upgrade existing European solvency rules for life, non-life,
reinsurers and captives. Structured around three pillars, Solvency II is a risk-based,
forward-looking regulatory regime founded on a 'total balance
sheet' and market-consistent approach. Companies will be given
incentives to run their business with an increased focus on risk
management, governance and enhanced disclosure.
Are all insurers involved?
All insurance companies authorised within Europe are covered
(unless very small). This includes insurers such as pure reinsurers
and captives which have previously had a limited scope of
regulatory involvement. Although the new regulations are targeted
at Europe they have wider implications, particularly for those
groups with head offices outside of Europe. There are also
considerations for European groups who have subsidiaries outside of
Many non-European countries are watching developments with
Solvency II very closely, and several have adopted or have
indicated their intention to adopt rules broadly based on the
One aspect of Solvency II is the power to recognise other
jurisdictions as "equivalent". If a non-European country can meet a
set of specified requirements for their insurance supervision then
they may be deemed "equivalent". This will enable and oblige
European regulators to rely on their supervision, and if the parent
of the group is in the "equivalent" country, then the global group
supervision can be coordinated by that country's regulator.
The Solvency II proposals can be described as based on a three
pillar approach (similar to Basel II). These cover:
What's the timeline?
The expected timeline for the entry into force and transposition
of the Directive Close
Adoption of the Directive by the European Parliament and the
CEIOPS advice on implementing measures
Adoption of the implementing measures
31 October 2012
Transposition of the Directive
What's happened so far?
The European Commission published a
revised draft proposal for a Framework Directive in early
February 2008. It was finally adopted, after intense negotiations,
by the European Parliament in April 2009. The EcoFIN Council,
co-legislator with the Parliament, is expected to formalise its
adoption in early May. The directive will become EU law once
published in the Official Journal.
In March 2009, CEIOPS published its "
first wave" of consultation papers on Level 2 measures: another
second wave was published on the 2nd of July, with a third and
final wave due towards the end of the year. The Commission has
announced its intention to conduct a fifth QIS from April to June
The critical questions for CEOs, CFOs, CROs and Chief Actuaries
- What is our level of ambition for developing risk and risk
based capital within the organisation, is it to meet Solvency II or
to exceed it?
- What ambition and revised strategies are our competitors
- How will this impact on my daily activities?
- Do we require an internal model?
- How do the potential capital requirements affect the business
- How will the detail of Solvency II impact on my day to day
- Are all Solvency II key business risks captured in our internal
- Can I manage and continuously report on risks at an individual
and aggregate level?
- What is the potential impact on the operational and
organisational structure of the business?
- Given the increased focus on public disclosure, what we will be
required to disclose for :
- Governance system;
- Risk profile, mitigation and sensitivity; and
- Solvency and financial condition.
- What are the implications for our corporate group
- Are there implications for my business strategy for growth
outside of Europe?
- What could Solvency II implementation cost?
- How can I ensure an effective implementation programme?