The Solvency 2 Directive in a Global Approach : Expectations for 2015

Haraszti, Zsófia (2015) The Solvency 2 Directive in a Global Approach : Expectations for 2015. BIZTOSÍTÁS ÉS KOCKÁZAT, 2 (1). pp. 22-33. ISSN 2064-9584

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Abstract

The Solvency 2 framework will take effect on 1 January 2016. It will replace 13 existing directives and introduce an economic riskbased solvency regime together with more adequate policyholder protection and greater level of transparency. It will modernise the supervision of insurance groups, strengthen the power of group supervisors and facilitate cooperation between supervisors. The Directive is organized around three pillars. Pillar 1 introduces quantitative requirements and will be based on a total balance sheet approach, i.e. assets and liabilities will have to be valued on a market consistent basis. Under pillar 1 the solvency capital requirement should be calculated at a level that enables the undertaking to operate safely and to ensure that policyholders are paid out in time. Pillar 2 provisions introduce sound governance and effective risk management requirements as well as a forward looking risk based supervision. Pillar 3 focuses on supervisory and public disclosure. The transposition of the Directive has already begun and most Member States are at the final stage of the implementation process. On 1 April 2015 the phasing-in period will start with a number of early approval processes, including approval for (group) internal models, own funds and matching adjustment. The Directive is complemented by the delegated acts, published in January, and by the technical standards, being prepared by the European Insurance and Occupational Pensions Authority. Completing the framework and finalizing its remaining elements will be an important task for the rest of the year, yet there are other European and international work streams that will play the industry’s concerns. The first contribution of the article is to present the remaining questions on the Solvency 2. The rest of the paper gives an overview of the European and international work streams that will have an impact on the insurance and reinsurance industry.

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