Solvency II

Modernisation of European insurance supervision clears next hurdle

The European Commission today presented its proposed specifications of the Solvency II regulation (“Delegated Acts”). GDV welcomes this further milestone for the start of Solvency II in 2016. Insurance supervision has also been the focus of the GDV Conference on 13 October 2014 in Berlin. The key aspects of the Commission proposal are explained briefly below.

Specification of long-term guarantee measures under Solvency II

The valuation of long-term guarantees is based on the interest rate term structure – the undertakings are using it to calculate the amount of capital they have to hold against their future liabilities of the coming decades. The political compromise on long-term guarantees is appropriately implemented in the specifications of the Delegated Acts.

Alexander Erdland

Alexander Erdland, GDV President:

“For insurers, a further milestone towards a modern global supervisory system has been achieved with the publication of the Delegated Regulation. The European Commission has found the right answers to key questions, such as how long-term guarantees of life insurers can be taken into account and how Solvency II can be handled by smaller businesses.”

Simplifications for small and medium-sized insurers

Solvency II will be one of the world’s most modern supervisory systems. Any risk an insurer is exposed to will be taken into account. The related increased complexity presents a challenge – not only for smaller undertakings. For this reason, the proposal includes appropriate adjustments for smaller undertakings. Depending on risk profile and business size, simplifications are included in relation to reporting and documentation requirements as well as business organisation and solvency calculations. Two examples: If the necessary requirements are met, undertakings may apply the valuation approach outlined in the German Commercial Code (HGB) in lieu of the International Financial Reporting Standards (IFRS). Under certain conditions, the internal audit function may be linked with other functions.

Particularities of infrastructure investments not addressed

Up to 59% of infrastructure investments must be backed by adequate capital. This is not in keeping with the actual risk associated with these investments. For this reason, the current capital requirements are not appropriate. Legislators have missed this opportunity to improve the conditions for infrastructure investments.

Schedule for Solvency II
Download (JPG)


Standard formula to be reviewed by 2018

By way of the Delegated Acts, the undertakings have been given a clear framework for the application of Solvency II as of 2016. At the same time, it is the right move to review the standard formula by 2018 in order to adapt the rules to new conditions and experiences. Through a Delegated Act, the European Parliament and the Council authorise the Commission to draft provisions for EU laws and framework legislation. The Parliament and Council then have three months (extendable by a further three months) to veto the Commission’s proposals.

More: Contact:
>> Position paper: Insurers open to dialogue on infrastructure financing
>> Insurance Supervision: GDV’s position on the Draft Legislation of the Insurance Supervision Act
Christian Ponzel
Phone: (+49) 30 / 2020 – 5186
Mail: c.ponzel@gdv.de