The introduction of Solvency II in January 2016 was a milestone.
The insurance industry now uses a risk-based approach to assess and mitigate risks. It also has better aligned capital to the risks it runs. Insurers have significantly strengthened their governance models and their risk management capacity.
The Solvency II framework is working well overall and indeed is a model which has been copied all over the world. EIOPA’s overall approach to the review has been therefore one of evolution not revolution.
However, there is no room for complacency particularly in the current economic situation. Solvency II needs to better reflect the low interest rate environment. It should also recognise that insurers with longterm and illiquid liabilities are particularly able to hold investments long-term.
In summary, the main purpose of the review was to make sure that the Solvency II regime remains fit for purpose. In doing so, we are also making sure that the regime can underpin the economic recovery after the pandemic.