Publication details
Significant aspects of the implementation of the Solvency II regulation
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| Year of publication | 2012 |
| Type | Chapter of a book |
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| Description | Solvency II is a new risk-based regulatory requirement for insurance and reinsurance companies that operate in the European Union. The Solvency II Directive deals with the adequacy of capital and risk management with the aim to protect policyholders. The development of financial markets and its institutions as one of the most important parts of every economy must not be underestimated. The lingering financial crisis and economic recession expose the markets to a high degree of uncertainty. According to Daňhel, Ducháčková and Radová (2013), the insurance sector was not the source of the crisis as much as the banking sector that has been subsequently regulated with the Basel II / Basel III international standard. However, the regulation of insurance market also started to appear as necessary. There has been a long process of creation of a sufficient model that would regulate the insurances in the European Union. The predecessor of the new Directive, Solvency I, introduced such requirements that allowed for differences to emerge in Europe. It was primarily focused on the prudential standards for insurers and did not include requirements for risk management and governance in the firms. The Solvency II Directive was developed to solve the mentioned weaknesses. Solvency II assumes certain capital restrictions / requirements to implement appropriate risk management system and in-depth internal control, higher degree of transparency of information due to frequent and quality reporting. It is being gradually implemented into the legislation of EU Member States. Due to the quantity of different studies and papers where the Solvency II Directive is analysed it has been difficult to draw clear conclusions. It is obvious that opinions about the new regime vary, which can be added to the fact that the date of entering of Solvency II into force is still ahead and the conclusions and potential impacts are only hypothetical. |