The Solvency II project was initiated by the European Commission (EC) in 2000 to implement a fundamental change to the current European insurance solvency framework.

It is intended that Solvency II, which will be based on the Basel II three-pillar approach, will produce a more consistent solvency standard across insurers and across the European region whilst also resulting in capital requirements that are more reflective of the risks being run by insurers.

The EC requested that the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS) act as an advisor in the development of the Solvency II regime. In particular, the EC asked CEIOPS to advise on calibrating the solvency standard and the economic consequences on the insurance industry, financial markets and policyholders through a series of quantitative impact studies (QIS). The results from the QIS, which comprise solvency calculations on a specified basis provided voluntarily by insurers from around the EU, will form a key input into the EC’s proposal for the Solvency II Directive.

Although the Solvency II project is still in the development phase, the general framework is already clear and a draft framework Directive has been published. However, the implementation of Solvency II should not be seen purely as a compliance exercise, but instead a tremendous opportunity to build a more effective way of running a company. Insurers who embrace this idea early on stand to gain a significant competitive advantage.

Solvency II background information 

our latest thinking

e-Alert: Final QIS5 Specification Issued 

The EU published the final technical specification for the fifth Quantitative Impact Study on 6 July 2010. There are a number of changes to the draft specification following consultations with the main stakeholders.

e-alert: Publication of the Report of the Catastrophe Task Force 

Roundtable partners Barrie & Hibbert and Watson Wyatt, together with industry leaders, recently took part in a unique forum that discussed the modelling and systems challenges of Solvency II.

e-alert: Public Hearing on Level 2 Implementing Measures 

The public hearing on the Level 2 implementing measures was held on 4 May 2010 in Brussels and a brief summary of the main points raised in the sessions are set out below.

e-alert: Draft QIS5 technical specification 

On 15 April, the European Commission (EC) released a draft technical specification for QIS5 and various calibration papers. Veteran Solvency II watchers will recognise the structure and much of the content from the Final Level 2 Advice from CEIOPS. However, the EC has made some substantial reductions to the quantum of some of the stress tests envisaged by CEIOPS.

e-alert: Lloyds Detailed Guidance Notes for Phase 2 of the Solvency II Dry Run Process 

On 1 April 2010, Lloyd’s issued its detailed guidance notes for Phase 2 of the Solvency II dry run process. These supplement Lloyd's November 2009 guidance notes and seek to give practical guidance to managing agents in respect of the dry run process and wider Solvency II preparations. The guidance notes consist of a detailed introduction, followed by 9 sections covering delivery Phases 2.1, 2.2 and 2.3.

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