Solvency 2

Solvency II is a European Directive for insurance and reinsurance undertakings in the European Union.

In line with Basel II reform for banks, the Directive aims at making the insurers identify properly and manage the risks of their company.

The requirements set in the legislation, can be structured into three pillars:

  • Pillar 1 : Valuation and Risk-Based Capital assessment requirements
  • Pillar 2: Enhanced Governance and risk management requirements
  • Pillar 3: Increased transparency requirements, namely with public disclosures and supervisory reporting

Those pillars come with an extra element about the insurance groups supervision, for which extended requirements are applicable. It namely includes the provisions about the college of the Insurance Supervisors mentioned in the Helsinki Protocol.

This reform involves deep modifications of the legal and regulatory framework for the insurance industry. It now deals with principle-based standards instead of rule-based ones. It also creates a level playing field in Europe, where there is a harmonization of prudential supervisory legislation, a unified reporting system defined under a risk-based approach with the proportionality principles.

Hence the directive provides insurers some freedom in the definition of some elements:

  • The calculation of the technical provisions.
  • The assessment of solvency capital requirements with the standard formula or -what is new- the use of full or partial internal models validated by the supervisor.
  • The asset’s policy formulation, designed with the prudent person principle.

The directive also generalizes the use of the fair value notion to build the prudential balance sheet.

The actual architecture of the directive is based on three levels of legal documents:

Level 1: The Solvency II Directive (Directive ​2009/138/EC), adopted in November 2009, and amended by Directive 2014/51/EU of the European Parliament and of the Council of 16 April 2014 (the so-called “Omnibus II Directive”).

Level 2: The Dele​gated Regulation (Delegated Regulation (EU) 2015/35)​​  adopted in October 2015 containing implementing rules for Solvency II. The Delegated Regulation was published in the Official Journal in January 2015. In September 2015, the EC adopted the Delegated Regulation 2016/467​ amending Commission Delegated Regulation (EU) 2015/35 concerning the calculation of regulatory capital requirements for several categories of assets held by insurance and reinsurance undertakings.

Level 3 : The accompanying Guidelines and Recommendations that aim at directing the undertakers for the application of the level 1 and 2 texts. The levels 3 texts are customized by each local supervisor, who can decide to comply or not with the EIOPA guidelines.

For any further information for the French supervision, please check on


Building on our experience with a lot of insurers, we really make a point of establishing strong and confident relations based on communication, long-term collaboration, and proximity with our clients. We offer a range of solutions and trainings to help your structure be comply with the Solvency II requirements.