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Solvency II:
changes to Solvency lie ahead

The European Commission has recently adopted new regulations coming into effect in 2020 which include a number of updates to the Solvency II standard formula calculations.

These changes have the potential to materially impact regulatory capital for those firms using the standard formula to calculate their capital requirements.

In order to be ready for these new regulations, the boards of Solvency II regulated firms need to:

  • Ensure that key stakeholders in the business (eg actuarial and risk management) develop plans to address the changes, giving consideration to changes in their roles and responsibilities
  • Understand the impacts these changes will have on business processes and on capital requirements
  • Reflect the new regulations in their own risk and solvency assessment (ORSA)
  • Ensure that specific Board actions are addressed ahead of time; for example, by adopting a risk management policy for deferred tax
  • Ensure that you can demonstrate to the regulator that the relevant regulatory conditions have been met, where the business is changing the calculation basis in response to the new rules.

The draft of these new regulations can be found here: https://ec.europa.eu/info/law/risk-management-and-supervision-insurance-companies-solvency-2-directive-2009-138-ec/amending-and-supplementary-acts/implementing-and-delegated-acts_en

Look out for our next blog which will provide more details on the key changes to the regulations.

If you would like to discuss how this might affect your business, please contact Rob Murray or Cat Drummond.