This article examines the business model of an insurer, gives a condensed history of insurance regulation to date and draws out the key features and benefits of the new legislation.
Solvency II intent is to create a safer and more resilient insurance industry, reducing the probability of firms failing. However, in addition to these overarching principles, Solvency II introduces several key features, the collective impact of which is to ensure firms identify, quantify and manage risks on a forward-looking basis, in addition to providing greater transparency:
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market-consistent valuation of assets and liabilities;
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enhanced quality of capital;
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a forward-looking and risk based approach to capital requirements;
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improved governance and risk management requirements;
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a rigorous approach to group supervision; and
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strengthened market discipline through increased firm disclosures.
These features, and the anticipated impact they will have, are explained throughout this informative, explanatory article.
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