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 existing 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: EU CRD IV package—essentials.5). Like CRD IV, the Solvency II Directive 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

For more detailed information on the Solvency II Directive, see Practice Note: EU Solvency II—essentials.

For a chronological tracker of the development and implementation of the Solvency II framework, including links to EU legislation, rules and guidance, see: EU Solvency II—timeline.

Solvency II—background

The background to the Solvency II Directive is the legislative framework begun