Solvency II—essentials
Solvency II—essentials

The following Financial Services guidance 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
  • Solvency II—Pillar 2—governance and risk management
  • Solvency II—Pillar 3—disclosure and reporting
  • Solvency II—rights of establishment and freedom to provide services (passporting)
  • Solvency II–third country branches
  • Solvency II—third-country equivalence
  • Solvency II—ISPVs
  • more

BREXIT: As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. This has an impact on this Practice Note. For further guidance on the impact of Brexit on payment services regulation, see Practice Note: Impact of Brexit: Solvency II—quick guide.

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