The prudential regulation of insurers under Solvency II

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Dear Colleague,

The Bank of England today published a Bulletin article from the forthcoming Q2 edition that we thought might be of interest:

The prudential regulation of insurers under Solvency II (see also short video)

  • The introduction of Solvency II will see the move to a forward-looking capital regime that will provide greater incentives for European insurers to improve their management of the risks they face – marrying together risk and capital.  For the UK, Solvency II should be seen as more of an ‘evolution’ than a ‘revolution’ given that UK insurance firms already operate to a risk-based capital regime under the remit of ICAS. 

  • This article sets out in one place, and in simple terms, some key features of Solvency II, including:
    - a market-consistent valuation of assets and liabilities (including the role of the ‘matching adjustment’);
    - the move to a going concern regime (including the concept of the ‘risk margin’);
    - the enhanced quality of capital in the new regime; and
    - improved approaches to governance, risk management, group supervision and firm disclosures.

The Bank also published an article that explains banking interconnectedness. Past editions of the Bulletin can be accessed here.  The rest of the Q2 edition will be published on Thursday 18 June.  If you have any questions or would like to give us feedback on this piece, you can contact the editor at

PRA Communications

Prudential Regulation Authority | MG1-SE | 20 Moorgate | London EC2R 6DA

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