Solvency II, European insurers under pressure from the new prudential standards

Since its coming into force on 1 January 2016, the new Solvency II regulation has significantly transformed the insurance industry. European companies in the sector are now subject to more stringent prudential regulations. Insurers are now obliged, among others, to have more substantial equity in order to reduce their risk of ruin. In terms of investment, holding portfolio shares will be penalized, while the bonds will be favored.

As regards corporate governance, insurance agencies will be required to have highly skilled managers in key functions such as actuarial, risk management, internal audit and compliance.

For many insurers, the new Solvency II prudential standards require huge investment and skilled labor. These constraints will push actors to encourage operations of mergers and acquisitions.

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