Solvency II

WHAT IS THIS? Europe’s Solvency II directive came into effect in 2016, putting risk at the heart of a harmonised prudential framework for insurance firms. Similar in outline to the banking industry’s Basel standards, Pillar 1 sets out quantitative requirements; Pillar 2 tackles risk management and governance; Pillar 3 addresses transparency, reporting and public disclosure.

The liquidity gap

Regulators are increasing their focus on liquidity risk in response to the financial crisis, but there are questions about whether capital is an effective mitigant for liquidity risks and the nature of the relationship between liquidity risk and bank…

Solvency abuse

Giovanni Cucinotta, head of research at Italian insurance regulator Isvap, talks to Alexander Campbell

Confidence crunch

Many financial institutions calibrate their required level of economic capital by considering the probability of default associated with a target debt rating. However, as the financial crisis has shown, confidence in a bank can erode before its Tier I…

Different degrees

Solvency II will require a massive upgrade in insurers’ technological capability. But as the deadline for implementation looms ever closer, not all in the industry have made the same level of progress.

The hybrid split

Insurers’ capital management has relied heavily on hybrid debt over the last decade – a strategy that has come under threat from Ceiops' latest Solvency II proposals. Aaron Woolner reports

Pensions puzzle

Senior politicians in Brussels are calling for Solvency II to be extended to incorporate occupational pension schemes. But actuaries and other solvency experts say this would be a disaster for plan sponsors and members. John Ferry reports

Fit to size

The one-size-fits-all approach of Solvency II's standard formula has left insurers with a dilemma. Should they use a standard model that is not appropriate to their business strategy, or opt for an internal model that is expensive and time-consuming for…

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