Solvency II
What Is Solvency II
Are you aware of what is Solvency II? This is a new framework that was created and developed by the European Commission. This one will update and replace the outdated Solvency I regime. This was approved by the European Parliament on 22th April 2009 but will come to force on October 31th 2012. This is one of the biggest and largest changes experienced in the story of insurance industries in Europe that will make an important change in what goes to capital requirements for insurance companies, which can be compared to the way Basel II changed it for banks.
Which is the main objective of this regulation? We could say that it is the supervision and adequacy of the policy holder’s protection. Other reasons, might be the financial stability, considering the current financial issues Europe it is cursing, the implementation of this project pretends to protect the market as well, which shouldn’t distracted from the main reason anyway. The capital ratio required for individual companies will depend on their risk profile. Those with a lower risk profile with have lower solvency requirements.
Capital requirement will have to reflect the specific risk of the insurance undertaking. Those insurers who manage better their risk with straight and strong policies and appropriate risk management techniques. Those will be rewarded to hold less capital than with the regime used today. Of course, those companies who are not following these procedures as they should, with larger risk appetite, well they will be asked to hold more capital so that the ensure policy holder claims will be met when they fall due.
Either way, it is important that you know how this new regulation it is going to affect you or your business. It is important that you are informed. Enter our site and learn more about solvency II.