Solvency II – still challenges to overcome
Large parts of Solvency II are in place, but there are still challenges to overcome. The postponed implementation until 2015 – or later, will give more time for adjustments.
Solvency II represents a fundamental overhaul of European insurance supervision. The aim of the new solvency regime is to increase protection for policyholders and increase the stability of financial markets. Finance Norway is working to ensure that Solvency II is adapted appropriately to the Norwegian insurance industry.
One of the greatest weaknesses of the current regime, Solvency I, is that it is simple and factor-based, and a number of key risks – such as market risk, credit risk and operational risk – are not adequately captured. The lack of risk sensitivity in Solvency I means that companies do not have incentives to improve their risk management, and does not promote optimal allocation of capital.
Solvency II brings a more risk-based, market-consistent approach to insurance supervision. The aim is to build a more proportional solvency framework where all risks are identified in such a way that the solvency capital requirements reflect the actual risk to which insurers are exposed.
Find the full article below (pdf).