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...

Solvency II—essentials

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). It applies to insurance groups as well as solo firms.

The Solvency II Directive, being a Directive, was transposed into UK law mainly through rules adopted by the Prudential Regulation Authority (PRA), with some rules adopted by the Financial Conduct Authority (FCA), each underpinned by the UK Solvency II Regulations 2015 which made amendments to various UK legislative provisions, including the Financial Services and Markets Act 2000.

The UK withdrew from the EU on 31 December 2020 but retains a regime which is still based on Solvency II, although it has been adapted to apply to the UK only rather than within the EEA as a whole. Areas in which the UK regime may diverge from the EU have already been discussed following a call for evidence by HM Treasury and may be given effect in the coming year or so. See ‘The future of the

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