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For details on the complementary Insurance Resolution and Recovery Directive framework for managing insurance failures.
The EU's risk-based supervisory framework for insurers and reinsurers
Solvency II is the prudential regime for insurance and reinsurance undertakings in the European Union, which came into force in January 2016. Its primary objective is to ensure the adequate protection of policyholders and beneficiaries by establishing a robust, risk-based framework for assessing the 'overall solvency' of an insurer.
A comprehensive review of the framework introduced significant refinements and the complementary Insurance Recovery and Resolution Directive (IRRD). Formally adopted as Directive (EU) 2025/2, the amending Solvency II Directive will see its new rules take effect on January 30, 2027, with insurers now focused on final implementation, validation, and operational readiness.
The core principles that define the Solvency II framework are:
In July 2026, European Insurance and Occupational Pensions Authority (EIOPA) completed the legal instruments it was mandated to develop under the Solvency II Review. The final package covers areas including liquidity risk management, risk margin calculation, matching adjustment, group solvency, ring-fenced firms, reporting and disclosure.
With the framework applying from 30 January 2027, attention is now on incorporating the final requirements, completing testing and preparing for the first reporting cycles under the revised regime.
Solvency II
The framework is built on three pillars, which work together to create a comprehensive regulatory and supervisory system.
Pillar 1: Quantitative requirements
Pillar 1 defines the capital that insurers must hold, based on a market-consistent valuation of their assets and liabilities. Its key components include:
Pillar 2: Qualitative requirements and supervisory review
Pillar 2 sets harmonized requirements for governance, risk management, and the supervisory review process. Firms must have:
Pillar 3: Supervisory reporting and public disclosure
Pillar 3 ensures transparency through detailed reporting requirements.
What should insurers be considering now?
- Confirm impacted calculations, methodologies and configurations reflect the final requirements.
- Validate revised reporting and disclosure requirements and downstream data implications.
- Complete end-to-end testing and ensure regulatory changes are traceable and controlled.
- Prepare processes and teams for the transition and subsequent reporting cycles.
Solvency II
The Solvency II framework is extensive and applies differently across jurisdictions.
For details on the complementary Insurance Resolution and Recovery Directive framework for managing insurance failures.
For information on the post-Brexit prudential regime for insurers in the United Kingdom.
For a technical deep-dive into the reporting methodologies, including the Data Point Model (DPM) and XBRL, that underpin supervisory reporting.
As Solvency II evolves, insurers need to manage change across risk calculations, data and supervisory reporting while maintaining consistency and control across the regulatory process. The Regnology Insurance Hub brings together risk calculation and supervisory reporting capabilities to support insurers across Solvency II and related regulatory requirements, including IRRD.
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