SOLVENCY II: CURRENT STATE, DIRECTIVE (EU) 2025/2 AND WHAT’S NEXT

 

EXTERNAL ARTICLE

Estimated reading time: 4 min.


Since its entry into force in 2016, Directive 2009/138/EC — “Solvency II” — has been the cornerstone of European prudential regulation for insurers and reinsurers. Built around three pillars (capital requirements, governance and risk management, transparency and reporting), the framework has already undergone several technical adjustments to adapt to market realities and supervisory practice.

 

CURRENT STATE


The main Solvency II text, as amended up to 2019, includes Directive 2009/138/EC, Delegated Regulation (EU) 2015/35, implementing regulations and standards (ITS/RTS), and the Quantitative Reporting Templates (QRTs). The current reporting framework relies on XBRL taxonomy version 2.8.x.


Currently in force: rules on technical provisions, SCR/MCR capital requirements, quarterly/annual reporting at solo and group level, and public disclosure through the Solvency and Financial Condition Report (SFCR).

 

WHAT CHANGES WITH DIRECTIVE (EU) 2025/2 AND THE NEW DELEGATED REGULATION


•    Directive (EU) 2025/2, adopted on 27 November 2024, introduces significant updates: more proportionality, higher quality of supervision, stronger long-term guarantee measures, new macroprudential tools, explicit integration of sustainability and climate risks, and enhanced group and cross-border supervision. (eur-lex.europa.eu)
•    In July 2025, the European Commission published a draft amending Delegated Regulation (EU) 2015/35. This translates the Directive’s objectives into technical standards. (finance.ec.europa.eu)


MAIN TECHNICAL MODIFICATIONS PROPOSED

 

  • Spread risk recalibration: tougher stress tests for long-dated and lower-rated instruments.
  • Spread risk recalibration: tougher stress tests for long-dated and lower-rated instruments.
  • Extrapolation of the risk-free curve: new formulas for long-term liabilities, improving accuracy and consistency.
  • Risk margin methodology: revised to better reflect the cost of transferring insurance obligations.
  • Long-term equity investments: improved treatment of stable participations in capital requirements.
  • Correlation of risks: refined modelling of interactions between interest rate and spread risks.
  • Natural catastrophe risk: updated calibration for floods, hail, and subsidence.
  • Own funds classification: clearer criteria for capital instruments.


TIMELINE & NEXT STEPS


•    Directive (EU) 2025/2 is already in force (published in the Official Journal, January 2025).
(eur-lex.europa.eu)
•    Member States must transpose the Directive by 30 January 2027.
•    The amended Delegated Regulation will also become applicable from January 2027.
(finance.ec.europa.eu)
•    In parallel, EIOPA has launched a public consultation in July 2025 on supervisory reporting and disclosure ITS/RTS. The final standards are expected in 2026, with QRT changes and taxonomy updates entering into force in 2027.
(eiopa.europa.eu)

 

USEFUL SOURCES

 

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