Solvency II

Solvency II is the European regulatory framework that has applied to insurance companies since 2016. It aims to strengthen the financial soundness of insurers, harmonise supervisory practices across the European Union, enhance the comparability of financial and regulatory disclosures, and provide better protection for policyholders.

The directive is structured around three complementary pillars:

Quantitative Requirements Insurers must maintain adequate capital to cover the risks to which they are exposed. Two key capital thresholds are defined:

the Solvency Capital Requirement (SCR);

the Minimum Capital Requirement (MCR).

Qualitative Requirements (ORSA) These relate to governance, risk management, and internal controls. Each insurer must demonstrate its ability to identify, measure, and manage its risks, notably through the Own Risk and Solvency Assessment (ORSA) process.

Transparency and Reporting Insurers are required to disclose regular information to supervisory authorities (ACPR, EIOPA) and to the public, particularly through:

Quantitative Reporting Templates (QRTs);

the Solvency and Financial Condition Report (SFCR).

This framework promotes a risk-based approach to supervision and contributes to the harmonisation of prudential standards across the European insurance market.

EIOPA (European Insurance and Occupational Pensions Authority) is the European body responsible for developing, coordinating, and supervising the implementation of the Solvency II framework across Member States.