Through Solvency II, new supervisory
and equity capital requirements are being introduced that are aimed at creating
a comprehensive system for total solvency. “Total solvency” refers to furnishing
an insurance company with equity capital for the purposes of covering all the
risks of that company.
As with Basel II (the equivalent for the banking
sector), Solvency II is based on a three-pillar approach:
- The first pillar regulates the quantitative aspects, such as minimum capital requirements, equity capital requirements or evaluation issues.
- The second pillar regulates risk management and deals with qualitative matters such as organisation or requirements relating to companies’ core processes.
- The third pillar concerns the insurance companies’ reporting requirements to supervisory authorities and disclosure requirements to the public.