Factsheet Solvency II - Final - English - tcm47-335167
Factsheet Solvency II - Final - English - tcm47-335167
Factsheet Solvency II - Final - English - tcm47-335167
1 Medium-sized and large insurance companies are those whose gross premium income
exceeds EUR 5 million and/or whose technical provisions exceed EUR 25 million and/or whose
reinsurance activities and/or activities abroad are non-negligible.
with. The smallest insurers – with premium income and Insurance companies may voluntarily choose to subject
technical provisions not exceeding EUR 2 million and themselves to a stricter supervisory framework: exempt
EUR 10 million, respectively, and whose maximum sum insurers may opt for Solvency II Basic and insurers governed
insured is EUR 12,500 – are exempt from DNB’s supervision. by Solvency II Basic may opt for Solvency II.
Solvency II is based on three pillars, setting out risk Pillar 2 concerns the governance of insurance companies.
quantification, governance and transparency requirements. In concrete terms, an effective system of governance
includes four key functions: risk management, compliance,
Pillar 1 contains quantitative requirements, including markt- actuarial, and internal audit. This pillar also imposes fit and
to-market balance sheet valuation and quantification of proper requirements on directors, managers, and holders of
market risks and insurance technical risks. Insurers must these key functions. In addition, insurers themselves must
value their balance sheet items based on current market review their policies, strategy and risk appetite on a regular
prices and measure their risks using either a standard basis in an own risk and solvency assessment (ORSA) and
formula or an internal model. These two methodologies report their findings to DNB.
serve to calculate the buffer they must maintain.
The standard formula is the risk measurement 1 Medium- Pillar 3 safeguards transparency by means of the
sized and large insurance companies are those whose gross solvency and financial condition report (SFCR), which is
premium income exceeds EUR 5 million and/or whose public, and the regular supervisory report (RSR), which
technical provisions exceed EUR 25 million and/or whose is confidential. The public report is published annually
reinsurance activities and/or activities abroad are non- and contains information about an insurer’s activities
negligible. methodology established at European level. and results, operations, risk profile, the principles used to
Insurers must be able to demonstrate that the standard value its assets, technical provisions and other liabilities,
formula is suitable for them. If the standard formula does and capital management. Insurers are also required to
not match their specific risks, they must use a full or partial publish quantitative reporting forms, which constitute the
internal model or company-specific parameters. These confidential report, together with a descriptive section. This
internal models must be drawn up by the companies descriptive section is identical to the public report in terms
themselves and approved by DNB. of structure but contains additional, confidential supervisory
information. The confidential report also comprises as a whole. Another overarching element of the Solvency II
the ORSA of pillar 2. In addition to these three pillars, framework is the supervisory review process (SRP), which
Solvency II elaborates on three key themes: improving group defines the reviews, evaluations and assessments to be
supervision, the supervisory review process, and cooperation conducted by the European supervisory authorities. Lastly,
between supervisory authorities. Group supervision will the new framework harmonised at a European level should
be substantially enhanced under Solvency II. In practice, encourage international collaboration between supervisory
this means that supervision will be exercised not only on authorities within the European Insurance and Occupational
individual insurers as part of a group but also on the group Pensions Authority (EIOPA).
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