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The ground on which a building stands.

Solvency II is an EU legislation governing the capital adequacy regime for the European insurance industry. It establishes a set of EU-wide capital requirements and risk management standards.

The Prudential Regulation Authority (PRA) has published policy statement PS15/25 which provides feedback to responses to consultation paper CP19/24 and sets out the PRA’s final policy. This includes amendments to the Reporting Part of the PRA Rulebook, the introduction of four new reporting templates and instruction files, and updates to PRA supervisory statement SS 15/16: Solvency II: Monitoring model drift and standard formula SCR reporting for firms with an approved internal model. Firms in scope are expected to prepare for implementation of the liquidity reporting rules by 30 September 2026 – a deferral from the originally proposed date of 31 December 2025, as consulted on. Further guidance and taxonomy updates are expected to follow.

The European Insurance and Occupational Pensions Authority (EIOPA) has published three consultations related to the review of Solvency II, focusing on guidelines on exclusions from group supervision, revised guidelines on the treatment of related undertakings and a revised opinion on the use of volatility adjustments. Responses are sought by 26 June 2025.

The European Insurance and Occupational Pensions Authority (EIOPA) has published an opinion on the impact of increased size thresholds as part of the Solvency II review on insurance undertakings in scope of the Digital Operational Resilience Act (DORA). EIOPA calls on the European Commission to ‘take the necessary actions to avoid disproportionate compliance efforts from small insurance undertakings in the transition period prior to the application of the revised Solvency II Directive’.

ARCHIVED: This archived Practice Note looks at the impact of Solvency II (a European risk-based solvency capital regime that applies to insurance and re-insurance companies and came into force on 1 January 2016) on UK pensions. It is not maintained and is for background information only. What is Solvency II? Solvency II is a European risk-based solvency capital regime which provides a harmonised prudential framework for insurance and re-insurance companies. This regime consists mainly of the Solvency II Directive 2014/17/EU (OJ L 60/34) (Solvency II) and a set of regulatory technical standards (RTS) and non-binding guidelines, including Commission Delegated Regulation (EU) 2015/35 (the Solvency II Delegated Regulation). Solvency II regime was introduced on the back of the 2008 financial crisis, which indicated an underestimation of risks. Requirements were thus placed on insurers to measure risk, report it, and set aside appropriate capital. The aim of Solvency II was to enhance protection of consumers of insurance products through introducing risk management and governance management, as well as by requiring a market-consistent valuation of insurer’s assets and

The Bank of England has published a statement by the Prudential Regulation Authority (PRA) that it plans to publish its final package of rules relating to the Solvency II review in mid-November 2024, with 31 December 2024 being the effective date.

The European Insurance and Occupational Pensions Authority (EIOPA) has published its final report on the prudential treatment of sustainability risks within Solvency II, recommending additional capital requirements for fossil fuel assets on European insurers’ balance sheets to accurately reflect the high risks of these assets. The European Commission asked EIOPA to assess the potential for a dedicated prudential treatment of assets and activities associated with environmental or social objectives or those that harm such objectives.

The European Insurance and Occupational Pensions Authority (EIOPA) has published the results of its peer review on the supervision of the Prudent Person Principle (PPP) under Solvency II. The review focused primarily on the supervision of investments in non-traditional and complex assets, including derivatives, and the use of such assets in unit-linked and index-linked contracts, where market risk is typically borne by the policyholder.

The Prudential Regulation Authority (PRA) has published policy statement PS10/24, Review of Solvency II: Reform of the Matching Adjustment (MA), providing final policy and feedback to responses to consultation paper CP19/23, Review of Solvency II: Reform of the Matching Adjustment. Included in the PS is a statement of policy (SoP) setting out the PRA’s approach to granting MA permissions, as well as variations to those permissions and the circumstances in which the PRA may take the decision to revoke a firm’s MA permission. It also sets out how the PRA will assess the ongoing performance of the MA permissions framework.

The Prudential Regulation Authority (PRA) has published an update on the Solvency II Review—matching adjustment reform implementation considerations for 30 June 2024. It clarifies issues raised by firms in their response to consultation paper CP19/23, Review of Solvency II: Reform of the Matching Adjustment. The PRA is currently considering feedback to CP19/23 and says it is on track to publish a policy statement, including final rules, in early June 2024.