Solvency II


Solvency II:

Solvency II is a fundamental review of the capital adequacy regime for the European insurance industry. It aims to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current Solvency requirements.


The European Commission publishes the technical specifications for the fifth quantitative impact study (QIS5), see the FSA’s QIS5 page for further information.

The Insurance Sector Newsletters contain useful information for firms about the FSA’s approach to moving from ICAS to Solvency II.

The FSA publishes Delivering Solvency II – an update that summarises the key policy developments and implementation activities.

The Solvency II Directive is due to be implemented on 1 November 2012. Any changes to the go live date will be formally communicated by the European Commission, when the FSA will consider and communicate the potential impact on planning and preparations for itself and firms.


The Solvency II Directive will apply to all insurance and reinsurance firms with gross premium income exceeding €5 million or gross technical provisions in excess of €25 million (please see Article 4 of the Directive for full details).

In a nutshell:

  • Solvency II will set out new, strengthened EU-wide requirements on capital adequacy and risk management for insurers with the aim of increasing policyholder protection; and
  • the strengthened regime should reduce the possibility of consumer loss or market disruption in insurance.

Central elements:

Central elements of the Solvency II regime include:

  1. Demonstrating adequate Financial Resources (Pillar 1): applies to all firms and considers key quantitative requirements, including own funds, technical provisions and calculating Solvency II capital requirements (the Solvency Capital Requirement -SCR, and Minimum Capital Requirement -MCR), with the SCR calculated either through an approved full or partial internal model, or through the European standard formula approach.
  2. Demonstrating an adequate System of Governance (Pillar 2): including effective risk management system and prospective risk identification through the Own Risk and Solvency Assessment (ORSA).
  3. Supervisory Review Process: the overall process conducted by the supervisory authority in reviewing insurance and reinsurance undertakings, ensuring compliance with the Directive requirements and identifying those with financial and/or organisational weaknesses susceptible to producing higher risks to policyholders.
  4. Public Disclosure and Regulatory Reporting Requirements (Pillar 3).

Adoption procedure:

Solvency II is being created in accordance with the Lamfalussy four-level process:

  • Level 1: framework principles: this involves developing a European legislative instrument that sets out essential framework principles, including implementing powers for detailed measures at Level 2.
  • Level 2: implementing measures: this involves developing more detailed implementing measures (prepared by the Commission following advice from CEIOPS) that are needed to operationalise the Level 1 framework legislation
  • Level 3: guidance: CEIOPS works on joint interpretation recommendations, consistent guidelines and common standards. CEIOPS also conducts peer reviews and compares regulatory practice to ensure consistent implementation and application.
  • Level 4: enforcement: more vigorous enforcement action by the Commission is underpinned by enhanced cooperation between member states, regulators and the private sector.

The Level 1 Directive text was adopted by the European Parliament on 22 April 2009 and was endorsed by the Council of Ministers on 5 May 2009, thus concluding the legislative process for adoption. This was a key step in the creation of Solvency II.  The Directive includes a ‘go live’ implementation date of 1 November 2012 for the new requirements, which will replace our current regime.

Delivering Solvency II:

In June 2010 we published Delivering Solvency II giving a summary of the key policy developments and implementation activities.  The first issue includes: Completing the fifth QIS; Deciding to use an internal model; Reporting, disclosure and market discipline (Pillar 3); System of Governance; Getting involved in FSA forums; and Key contacts.

Delivering Solvency II

How to Combine Lean Six Sigma, SOA & BPM To Deliver Real Business Results

Managing Waste and Improving Efficiencies

In the current economic market, organisations are often forced to seek innovative ways to save time, money and reduce waste. This is typically achieved through reviewing waste management and understanding where there may be efficiency gains. Sadly, this activity is not given the attention, time, effort or resources necessary to deliver long-term business benefits. The end result is often poor management decisions, redundancies and “quick & dirty” cost-cutting initiatives leading to low morale across the organisation.

What’s the Solution?


Organisations should invest time in reviewing how they can adapt their SOA/BPM strategies to include Lean Six Sigma techniques.

Lean Six Sigma (LSS) produces real results in difficult economic times by uncovering process waste, reducing non-value adding activity, and increasing productivity. The benefits are even felt in IT. According to the consulting firm McKinsey & Company, “companies can reduce application development and maintenance costs by up to 40%.” That application development productivity can be improved “by up to 50%” by applying LSS techniques, freeing budget for needed investments.



Business process management (BPM) and service-oriented architectures (SOAs) combine with LSS to accelerate improvements and results. At the same time, they increase organizational flexibility and technology enabled responsiveness.Many successful companies have found that the linkages are clear. Early adopters who have worked their way past cultural and organizational barriers are seeing impressive performance and financial results:




  • Improved responsiveness to market challenges and changes through aligned and significantly more flexible business and technical architectures
  • Improved ability to innovate and achieve strategic differentiation by driving change into the market and tuning processes to meet the specific needs of key market segments
  • Reduced process costs through automation and an improved ability to monitor, detect, and respond to problems by using real-time data, automated alerts, and planned escalation
  • Significantly lower technical implementation costs through shared process models and higher levels of component reuse
  • Lower analysis costs and reduced risk through process simulation capabilities and an improved ability to gain feedback and buy-in prior to coding 



The rewards can be great, especially for those who take action now.

Lean Six Sigma (LSS) produces real results in difficult economic times by uncovering process waste, reducing non-value adding activity, and increasing productivity.

Business process management (BPM) and service-oriented architectures (SOAs) combine with LSS to accelerate improvements and results. At the same time, this combination increases organizational flexibility and technology-enabled responsiveness, key to positioning the company for growth as the economy improves.

Process improvement experts are uniquely positioned to play a key role in this transformation as they are able to leverage their business and technical knowledge in combination with the tools and techniques of Lean Six Sigma.

Examples will be provided along with recomendations for getting started.


  • Understand the basics of Lean Six Sigma and how BPM and SOA support the Lean Six Sigma methodology
  • Understand how to use data to select the right improvement project
  • Understand how Business Architects and Business Analysts can play a role in accelerating results

The presentation is available for download here was provided by Hans Skalle an esteemed colleague from IBM’s Global Business Integration Group.

Hans Skalle specializes in Business Process Management (BPM) solutions, business process modeling, and the development of financial models and business cases to support BPM and integration software investments. He has worked directly in the Information Technology industry since 1980 including 8 years as a Business Analyst. He is the lead author of an IBM Redpaper: Aligning Business Process Management, Service-Oriented Architecture, and Lean Six Sigma for Real Business Results. 

Hans has more than 20 years of hands-on process improvement consulting experience and is a past Master Evaluator for Minnesota’s Malcolm Baldrige-based Quality Award in the US. He has in-depth knowledge of various performance improvement methodologies including Six Sigma, Lean Sigma, ISO 9000 and other tools and techniques used to drive and sustain continuous improvement and competitive advantage through change and innovation.

The ROI Of Software-As-A-Service

Firms almost always consider software-as-a-service (SaaS) as a cost-advantage over on-premise in theshort run due to its quick implementation times and pay-as-you-go pricing. But many firms questionthe long-term value of SaaS, wondering if the rent-versus-own model necessarily has a cost crossoverpoint and if so, when? As SaaS continues to move into a broader range of applications and into larger,more strategic deployments, Forrester examined client decisions across a range of SaaS solution areas and found that firms obtain long-term value with SaaS solutions.

Asher Hasan’s message of peace from Pakistan

About this talk
One of a dozen Pakistanis who came to TED India despite security hassles entering the country, TED Fellow Asher Hasan shows photos of ordinary Pakistanis that drive home a profound message for citizens of all nations: look beyond disputes, and see the humanity we share.

About Asher Hasan
Asher Hasan’s social enterprise Naya Jeevan (the name means “new life” in Urdu and Hindi) is the emerging world’s first HMO for the urban, working poor.

Naif Al-Mutawa: Superheroes inspired by Islam

About this talk
In “THE 99,” Naif Al-Mutawa’s new generation of comic book heroes fight more than crime — they smash stereotypes and battle extremism. Named after the 99 attributes of Allah, his characters reinforce positive messages of Islam and cross cultures to create a new moral framework for confronting evil, even teaming up with the Justice League of America.

About Naif Al-Mutawa
Naif Al-Mutawa has created a group of comic superheroes based on Islamic culture and religion. They derive their superpowers from the 99 attributes of Allah.

Peace One Day – 21 September 2010

21 September: Peace One Day
In 1999, preoccupied with questions about the fundamental nature of humanity and the most pressing issues of our time, filmmaker Jeremy Gilley launched Peace One Day and set out to find a starting point for peace. He had a mission: to document his efforts to establish the first ever annual day of global ceasefire and non-violence with a fixed calendar date.

That date is 21st September and incredibly the 192 member states of the United Nations have unanimously signed up to mark this as the UN International Day of Peace.

To learn more, and learn how you can take part, click here.