Solvency II

This report examines the proposed revision of the regulation of insurance companies operating in the European Union and, in particular, the solvency rules. Solvency rules stipulate the minimum amounts of financial resources that insurers and re-insurers must have to cover risks to which they are exposed. These proposals follow on from proposals issued in 2002 (Solvency I), but are seen as a more fundamental and wide ranging review of the overall financial position of insurance and reinsurance companies. These new proposals were published in 2007 with the aim of updating legislation that dates back to 1970s that is seen as no longer reflecting developments within insurance, risk management, finance techniques and international financial reporting. The aims of the European Union are to reduce barriers for firms operating in other Member States, improve protection offered to consumers and increase international competitiveness of European insurers.