The Solvency II regulatory framework has different layers at supranational level:
- Framework directive 2009/138/EU, introducing the essential principles of the new regime
- Regulation 2015/35/EU (the so-called Delegated acts – a second level measure), containing detailed measures on the new regime, recently amended by EU delegated Regulation 2016/467
- Implementing Technical Standards (ITS) which, for certain matters envisaged by the Directive and in the form of Community implementing regulation, introduces measures to regulate in detail the provisions of the new regime with a view to regulatory convergence
- Guidelines issued by EIOPA which, as third level measures, are also aimed to support supervisory convergence. The guidelines are subject to a comply / explain mechanism by which the national Supervisory Authority must state to EIOPA whether it intends to comply with the guidelines or indicate the reasons for not complying. The statement is published on the EIOPA website.
The Directive takes into account:
- the new European supervisory architecture (establishment of EIOPA),
- the legislative procedures foreseen by the Lisbon Treaty (including the possibility for the European Commission to issue Delegated acts and Technical standards in some areas),
- the need to introduce appropriate transitional measures and actions to address the problem of short-term volatility on capital requirements and own funds.
The Directive comprehensively revises prudential supervision in the insurance sector:
- it follows a risk-based approach: undertakings will have to consider all the risks to which they are exposed, taking also into account those on the asset side and the interrelationships between all risks for the undertaking (total balance sheet approach), managing them effectively and efficiently. Undertakings will be able to determine the capital requirement by using an internal model, subject to the approval of the Supervisory Authority
- it is divided into three pillars: quantitative requirements, qualitative requirements (governance, internal control and risk management) and supervisory reporting and public disclosure requirements
- it reviews the supervisory processes, stimulating their convergence and homogenisation at European level (SRP - Supervisory Review Process)
- it strengthens group supervision by entrusting certain tasks and responsibilities to the group supervisor, who acts in collaboration with the other Authorities involved in supervision (college of supervisors); special measures are envisaged for groups with highly integrated risk management, thus allowing to supervise the group as a single economic reality
- it simplifies the European regulatory framework.
Solvency II sets out a EU-wide set of capital and risk management requirements that match with the objective of consumer protection. The new regime might not apply to insurance undertakings whose gross written premium income amounts to € 5 million, or whose total technical provisions, gross of the amounts recoverable from reinsurance, do not exceed € 25 million and which do not pursue general liability, credit and suretyship insurance.
As a result of the negotiations on the so-called counter-cyclical measures within the Omnibus II Directive the date of application of Solvency II was finally set at 1 January 2016.
The Directive and the EIOPA guidelines require national implementation.
The Directive was transposed into Italian legislation by updating the Insurance Code.
The EIOPA guidelines are implemented by IVASS through special Regulations or by amending existing ones, ranging from the Pillar I quantitative requirements (capital requirements, technical provisions, own funds ..) to the Pillar II qualitative requirements (governance, ORSA, ..), to the third pillar requirements (reporting and disclosure).
Where the Solvency II provisions are not directly applicable they are implemented at national level and complete the reference regulatory framework.