The following Pensions guidance note provides comprehensive and up to date legal information covering:
Solvency II is a European risk-based solvency capital regime which applies to insurance and re-insurance companies and came into force on 1 January 2016. It replaced Solvency I and is a modernisation of European solvency standards, many of which had not been updated since the 1970s. It requires a robust risk management and governance management for insurers and re-insurers across the European Union (EU).
The Solvency II supervisory regime consists of three pillars:
Pillar I (Calculation of capital reserves) outlines the standard formula insurance companies across the EU have to use for the calculation of their capital reserves covering all types of risks
Pillar II (Management of risks and governance) contains the requirements for the management of potential risks and for governance
Pillar III (Reporting and disclosure) describes the information and reporting insurance companies across the EU have to submit to the national supervisor and disclose publicly
One feature of the 2008 financial crisis was an underestimation of risks. Solvency II requires insurers to measure risk, report it, and set aside appropriate capital. Solvency II has been described as an advanced supervisory regime, applicable in all EU Member States and based on the latest international developments in risk-based supervision, actuarial science and risk management.
Solvency II enhances protection of consumers of insurance products through introducing risk management
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