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Amendment to regulatory framework (Solvency II) approved

European authorities have agreed on the compromise text of a Directive on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II). Its main objective is to strengthen the stability of the insurance sector, to deepen its integration and competitiveness. The current 13 Directives relating to insurance and reinsurance have been recast into a single act. New and more elaborate rules of capital adequacy should better reflect the risks that insurance and reinsurance carry and ensure their sufficient coverage.

The Directive establishes two types of requirements; the solvency capital requirement (SCR) will be calculated on the basis of a risk profile according to a set formula or internal model approved by the supervisory authority. It takes into account all types of risks, including operational. It must be constantly monitored and recalculated as soon as the risk profile changes significantly. For the minimum capital requirement (MCR) the Directive provides for various types of insurance and reinsurance the absolute lower limit below which sources should not fall in any circumstances.

The Directive aims to improve the supervision of the insurance sector. So-called supervisory authorities colleges will be established for the supervision of groups to ensure better coordination of procedures between the supervisory authority of the parent company and the supervisory authorities of its subsidiaries. Member States should implement this Directive by 31 October 2012.

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