Solvency II—essentials
Solvency II—essentials

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Solvency II—essentials
  • Solvency II—overview
  • Solvency II—Three Pillars—overview
  • Solvency II—Pillar 1—capital requirements
  • Pillar 1—overview
  • Pillar 1—valuation of assets and liabilities other than technical provisions
  • Pillar 1—valuation of technical provisions
  • Pillar 1—own funds
  • Pillar 1—required amounts of own funds
  • Pillar 1—level 2 measures and level 3 measures
  • More...

BREXIT: 11pm (GMT) on 31 December 2020 (‘IP completion day’) marked the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. Following IP completion day, key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see: Brexit and financial services: materials on the post-Brexit UK/EU regulatory regime.

Solvency II—overview

Solvency II is a framework for the taking-up of business and supervision of insurance and reinsurance undertakings (hereafter referred to as 'firms') in the European Union (EU). Directive 2009/138/EC (the Solvency II Directive) replaced 14 previous directives (commonly referred to as Solvency I) and provides for a maximum harmonising regime achieving cross-border consistency. It is consistent with other financial service legislation, in particular with the framework for banking supervision (CRD IV/CRR—for more information see Practice Note: CRD IV—essentials). Like CRD IV, Solvency II is based on three pillars:

  1. Pillar 1: valuation and capital requirements

  2. Pillar 2: governance, internal control and risk management requirements

  3. Pillar 3: supervisory reporting and public disclosure

Solvency II introduced economic risk-based solvency requirements across all EU Member States. These solvency requirements are risk-sensitive and more sophisticated than in the past, thus enabling better coverage of the real risks run by any particular insurer. Solvency II seeks to increase

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