The Solvency II project was initiated by the European Commission in 2001. The commission relies on advice from the CEIOPS (committee of european insurance and occupational pension schemes).
Work on the project was initially divided into two phases. The first phase was completed in early 2003 with the aim of delivering a high level design of the new regime. During the second phase, now in progress, the details of the system are to be finalised.
Solvency II will change the European insurance industry:
- Risk management will be in the focus of regulators and companies
- Particularly the investment risk and ALM risk will be crucial for life companies
- Capital requirements for the different product lines will change
- Product development and pricing will have to react
- Value based management will become an important tool
- Reinsurance will be able to support the risk management process significantly
- Companies will increasingly seek to transfer or hedge the their risks in order to reduce capital requirements
Process of change will be a challenge for the industry, but there will be an award:
- Companies will increase profitability over the time
- Companies will be better managed
- Insurance industry will become more attractive for investors and customers