SOLVENCY II

SUPERVISION OF THE INSURANCE UNDERTAKINGS RISK MANAGEMENT SYSTEMS

Abstract

The main purpose of this paper is to analyze Solvency II which is
a new supranational insurance regulatory regime introduced by the
institutions of the European Union in order to enhance the financial
stability of the insurance and reinsurance undertakings, and provide
better protection for policyholders and insurance beneficiaries from
insolvent insurance. These paper consists of 4 parts, including:
1. Introduction;
2. “Solvency” - reasons for creating a new risk management
system;
3. “Solvency II” – System based on three pillars; and
4. Conclusion.
In the first part: “Introduction” we define and explain the new
regulatory framework of the European Union to maintain the solvency of
insurance institutions.
In the second part: “Solvency - reasons for creating a new risk
management system”, we explain the new capital requirements for
insurance undertakings of the European Union’s member-states, and also
the reasons for the changing of the method of calculating the capital
requirement for insurance and reinsurance undertakings, and the
methodology which is used to calculate this capital requirement.
In the third part: “Solvency II – System based on three pillars”,
we analyze in detail the legal framework of the European Union that
regulates the issue of Solvency II, as a system that is based on three
pillars which are: quantitative requirements, quality requirements and
mandatory disclosure of market data.
In the fourth part: "Conclusion", we give our basic conclusions
that arise from our paper.
We expect this paper to allow the establishment of a clear
picture of Solvency II regulation, which ensures that reorganization
measures that were adopted by the competent authority of European
Union member-states in order to preserve or restore the financial
soundness of an insurance undertaking, and to prevent, as far as possible,
a winding-up situation, will produce full effects throughout the
Community.