Solvency II is the new regulatory regime for all EU insurers and reinsurers, due to come into effect in 2012. Solvency II aims to implement solvency requirements that better reflect the risks that companies face and deliver a supervisory system that is consistent across the EU.
The risk based directive is based on a three-pillar structure:
Pillar I Demonstrating adequate financial resources refers primarily to the setting of minimum capital requirements.
Pillar II Systems of governance relates to the internal risk management processes and controls an insurer must put in place
Pillar III Reporting requirements requires regulated firms to disclose publicly key risk, management and financial information that is relevant to market participants