The European Commission (opens in new window), jointly with Member States, is carrying out a fundamental review of the regulatory capital regime of the insurance industry (the Solvency II project). Its objective is to establish a solvency system that is better matched to the true risks of insurers enabling supervisors to protect policyholders' interests as effectively as possible and in accordance with common principles across the EU.
HM Treasury and the Financial Services Authority published a joint Discussion Paper setting out key principles for Solvency II in February; a link to the paper is provided below. A link is also provided below to a further joint publication, on supervising insurance groups under Solvency II. This paper sets out a bold proposal for streamlining group supervision and allowing insurance groups freedom to allocate their regulatory capital efficiently.
The Commission has produced a Framework for Consultation (opens in new window) setting out the policy principles and guidelines that will act as a framework for the development of the Solvency II regime (the Commission may revise and update this so please select the latest version from the website). The Commission intends to adopt the Framework Directive by mid 2007.
The new Solvency regime will be developed using the Lamfalussy framework’s four level approach:
The level 1 ‘Framework Directive’ will be developed by the European Insurance and Occupational Pensions Committee (EIOPC, opens in new window), HM Treasury represents the UK on this committee. The level 3 advice will be developed by the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS, opens in new window) , the Financial Services Authority (FSA, opens in new window) represents the UK on this committee.
CEIOPS has provided responses to a number of requests for advice from the Commission, details of these and CEIOPS consultations on their advice are available at http://www.ceiops.org/.
Some of the documents are available below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website. For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.