Solvency II

The cost-of-capital rate falls from 6% to 4.75%, which on its own cuts the risk margin by roughly 21%. On top of that, a new exponential factor, 0.96^t, reduces the weight given to future SCRs, floored at 50% to keep an appropriate level of prudence.

Long duration life portfolios benefit most. The released technical provisions increase own funds, though the net solvency ratio effect depends on loss-absorbing capacity of deferred taxes and any transitional measures.

Most undertakings should expect an improvement, but not all. A lower risk margin, a wider symmetric adjustment corridor and broader long-term equity access work in your favour, the recalibrated interest rate risk sub-module and the revised extrapolation can work against you. Only a re-run on your own data will tell you.

Directive (EU) 2025/2 creates a new category of small and non-complex undertakings (SNCU), which get automatic access to proportionality measures covering reporting, disclosure, governance, revision of written policies, the calculation of technical provisions, the ORSA and liquidity risk management plans.

Undertakings outside the category can still apply for individual measures under Article 29d with supervisory approval, subject to conditions including life technical provisions of no more than €12bn, non-life gross written premiums of no more than €2bn, and no more than 5% of the domestic market.

Yes, Solvency II permits outsourcing of the actuarial function, subject to the outsourcing requirements and the appointment of a responsible person within the undertaking. An outsourced actuarial function coordinates the calculation of technical provisions, assesses data quality and the appropriateness of methodologies and assumptions, compares best estimates against experience, expresses opinions on the underwriting policy and on the adequacy of reinsurance arrangements, and contributes to the risk management system and the ORSA.

• Quantify the balance sheet impact of the new risk margin and extrapolation parameters.
• If you use the volatility adjustment, prepare for supervisory approval and the new undertaking specific calculation.
• Decide whether to seek proportionality classification or an Article 29d approval.
• And review whether your best estimate assumptions rely too heavily on historical data where climate-change trends may not be captured, since undertakings must have internal procedures to avoid that over-reliance.

First establish whether you need one: existing users may continue without approval if they meet the Article 77d(1) conditions. For new applicants there is no harmonised decision period, so timing rests with your national supervisor. Assume several months and open the pre-application dialogue now.

Insurance Recovery and Resolution Directive was published alongside the Solvency II amendments and shares broadly the same transposition window. It is a separate instrument covering recovery and resolution planning, but it draws on the same data, the same proportionality classification and largely the same people. Running the two programmes separately tends to duplicate effort.