Lessons learned: European insurers can draw from their experience carrying out Basel II to ensure a smooth ride to fulfilling Solvency II.(Regulatory/Law: Solvency and Capital Adequacy)

Best's Review, February, 2007 by Warrier, S.R.

Regulators worldwide are focusing on insurers' solvency and capital adequacy. In its effort to create a solvency regulation framework which is more tuned to the insurers' actual risk exposures, the European Commission has put together Solvency II--a risk-based approach to solvency regulations. Currently, the framework's details and implementation guidelines are being drafted and discussed. European insurance companies are preparing to comply with the regulations that go into effect in 2009.

Evolution of Solvency II

The existing approach to solvency is based on fixed ratios. This system doesn't match the true risk exposures of an insurance company. Basel II-the regulatory framework accepted by the Basel Committee of the Bank for International...

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