Solvency II will introduce a new regulatory and supervisory framework for Europe’s insurance industry. This framework is divided into three pillars: Pillar 1 – Quantitative Requirements (Capital Requirements); Pillar 2 – Governance & Supervision; and Pillar 3 – Disclosure & Transparency.
BENEFIT OF THIRD-COUNTRY EQUIVALENCY
The Solvency II Directive adopted on 25 November 2009 (Solvency II Directive), as amended by the Omnibus II Directive adopted on 11 March 2014 (Omnibus II Directive and together with the Solvency II Directive, Directive) is applicable to the European Union’s insurance industry. However, non-European jurisdictions may choose to achieve an equivalency status under Solvency II. Such jurisdictions will be assessed on three levels of equivalence with Solvency II:
(a) Insurance considerations – treatment of third country insurance (specifically the need to collateralize insurance arrangements with assessments within the European Economic Area);
(b) Group solvency calculation – ability to use local regulatory capital amounts in the Solvency II capital calculation; and
(c) Group supervision – reliance on third-country for group supervision (i.e. European supervisors need only to consider individual entities within their jurisdictions on a stand-alone basis).