Solvency II – Comes into force on the 1st January 2016

Solvency II is EU legislation which has an increased political will therefore it will be implemented throughout Europe. It’s main function is to harmonise insurance regulation on an EU-wide basis.

The legislation is designed to replace 14 existing EU insurance directives.

Solvency II is not just about capital, it is a comprehensive programme of regulatory requirements for insurers, covering authorisation, and other insurance regulated firms.

In January 2014 the European Insurance authorities had adopted a series of measures and consequently advised the PRA of these, in the form of guidelines. Subsequently PRA issued a supervisory statement setting out their expectation on governance, forward looking assessments, what the submission of information to the PRA will look like and the Pre-application of internal models.

The consequences of failure will result in sanctions being imposed on the insurer and/or Lloyd’s Managing Agent and the effect on an MGA would be the cessation of underwriting power.

We have often heard the term, Solvency II – Pillar III, below we set out the various pillars in this respect.

Pillar 1

Pillar 2

Pillar 3

Financial Requirements

Governance & Supervision

Reporting & Disclosure

Further information and an explanatory booklet are available here.

We are grateful to Lloyd’s of London for sharing this information with MGAA members