17/12/2010 “In the light of the recent banking crisis, the new Solvency II regulatory measures should be re-appraised”. Critically consider this statement | |

| INSURANCE |

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Summary

INTRODUCTION I) The banking crisis

II) The main principles of Solvency II 1) Three Pillars 2) Risk assessment : difference with Solvency I

III) Solvency II : Advantages and disadvantages 1) Advantages 2) Criticisms and points to review
CONCLUSION
References

INTRODUCTION
Solvency is the ability for an insurer to meet the long-term commitments that it takes with its customers. It depends on the size of these commitments and resources available to the insurance company to deal with, especially in the form of equity or asset it holds. Insolvency is the main financial risk faced by insurance companies (T.Pentikäien).
In Europe the first solvency margin requirements were established in 1973 for non-life insurance and in 1979 for life insurance, but since the end of the century the Müller’s report recommended changes because these requirements became obsolete and the market had change: all conditions were met to review the old guidelines, so Solvency I was born in March 2002. However Solvency I couldn’t take into account the economic risks they are exposed (Lloyds’. Solvency I).
Nowadays, in the movement of redefinition the margin of solvency in risk for all financial risks, and after the banks and the implementation of Basel II, it is the turn of the insurance. With the new regulatory Solvency II, now insurance companies take risks into account. The directive was passed April 22, 2009 and will be enters into force at the end of 2012. The directive is divided in three pillars and the objectives of Solvency II are to create a harmonized system, with better consideration of the risks faced by insurance organizations and more consistent with the prudential banking system.
The