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March 08, 2019

EC adopted a delegated regulation that amends the Regulation (EU) 2015/35, which supplements the Solvency II Directive (2009/138/EC) on the taking-up and pursuit of the business of insurance and reinsurance. EC adopted the new rules to help insurers to invest in equity and private debt and to provide long-term capital financing. The amendments will now be subject to a three-month scrutiny by the European Parliament and the Council. The delegated regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Based on expert advice from EIOPA and in-depth analyses by EC, the delegated act lowers the capital requirements for insurers' investments in equity and private debt, also aligning the rules applicable to banks and insurers. The amendments change various aspects of the Solvency II implementing rules, including the following:

  • Introduced simplifications in the calculation of capital requirements
  • Improved alignment between the insurance and banking prudential legislation
  • Updated principles and standard parameters to better reflect developments in risk management and the most recent data (including a better treatment of financial hedging strategies)
  • Corrected a number of drafting errors throughout the Solvency II Delegated Regulation
  • Further refined the recognition of risk-mitigation techniques, the group solvency calculation, and the volume measure for non-life premium risk, thus improving the risk-sensitivity of the capital requirement standard formula while better reflecting developments in market practices

The insurance industry is well-equipped to provide long-term finance by investing in equity and private debt, including of small and medium enterprises (SMEs); however, the actual share of their investments in the real economy remains limited. As a result of the new rules, insurers will have to hold less capital for such investments and will, therefore, find it more attractive to invest in the economy. This will further help mobilize private-sector investment which is a key objective of the Capital Markets Union.

 

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Effective Date: OJ + 20 Days

Keywords: Europe, EU, Insurance, Securities, Solvency II, Reinsurance, Regulation 2015/35, Capital Requirements, Capital Markets Union, EIOPA, EC

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