The drive for Solvency II is borne out of the European Commission’s desire to replace the existing Solvency I framework, which dates from the 1970s, with a framework that has a number of key features:
- a risk-based approach
- a unified legislative basis for prudential regulation of insurers and reinsurers
- a nonzero failure regime
- a link to the International Accounting Standards Board’s work on insurance contracts
The result of these aims is a Three Pillar Framework, as detailed in the original KPMG study for the European Commission.
Solvency II is often referred to as ‘Basel for Insurers’ and to a certain extent this is a reasonable summary. Consciously modelled on the Basel II framework for banking, Solvency II is being developed using a similar three pillar structure, with Pillar 1 setting out quantitative minimum capital requirements based on the market value of insurance liabilities, supervisory review processes and market discipline and disclosure.
Solvency II will have widereaching consequences for many areas of the business including the IT, actuarial, risk, operations and finance functions.
- Quantitative Impact Studies
- Gap-Analysis
- Full Implementation of Solvency II Requirements
- Process and Model improvements
- IFRS Implementation for insurances
- Actuarial Services