Status Update: Solvency II

General

Since the beginning of 2012, negotiations have been underway to finalise the content of the Omnibus II directive and the Level 2 implementing measures. The definitive agreement on the Omnibus II directive is expected shortly. The definitive agreement on the Level 2 implementing measures is expected in the autumn. The focus lies on the risk-free curve, capital requirements, and own funds, as well as transitional measures.

Pillar Developments
Additionally, there are developments per pillar:

 

Pillar I: Parallel Run and Risk-Free Term Structure

From 2011, Dutch insurers that fall within the scope of Solvency II must calculate their solvency (2011 and 2012) in accordance with the expected Solvency II measures (SCR and MCR) and report on this (Pillar 3) to the DNB. This is known as the parallel run.

A part of this reporting (and the calculation of the SCR) is the countercyclical premium, known as the CCP. A proposal has been developed for this CCP, using the formula from QIS5 as a basis. Two scenarios have been developed, with the countercyclical premium ranging between 75% (Scenario 1) and 100% (Scenario 2). In the definitive directive, more clarity will be created on this.

Pillar II: ORSA

The outcomes of the roundtable sessions held by the DNB regarding ORSA were positive. Bottlenecks include setting up mandatory key functions (Internal Audit, Risk Management, Actuarial Function, and Internal Control) and implementing IT systems. A frequently discussed aspect here is proportionality. Where the risk profile of the insurer must be chosen as the starting point. For example, an insurer with a low risk profile can make different choices in filling these bottlenecks (and other aspects of the directive) compared to an insurer with a high risk profile.

Pillar III: Consultation

Regarding Pillar III, the reporting requirements, the consultation period for several aspects (including reporting templates and National States) has closed, and the comments are currently being processed. More will follow on this later.

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