Solvency II: The potential impact

Mon Feb 21, 2011


Solvency II was approved by the European Parliament in April 2009. Joy Dunbar, editor of Absolute UCITS, looks at the new directive, which comes into force 1 January 2013, and what it means for the UCITS hedge fund industry.


The European insurance industry has to review assets because of a new EU directive due to come into force next year.

The Solvency II Directive requires insurance companies to be more prudent by setting new requirements on capital adequacy and risk management for insurers while imposing varying capital charges on different asset classes.

Bonds have a lower solvency capital requirement than other asset classes like hedge or equities.

The insurance industry in the Europe has total assets of around $6.5 trillion, according to the CEA, the insurance and reinsurance federation for the region.

For EU insurance companies overall, 39.9% of assets are invested in debt securities and other fixed-income securities, 26% are invested in shares and other variable-yield securities and units in unit trusts and 16.9% are invested in loans, including loans guaranteed by mortgages. Less than 5% is invested in other assets.

Solvency...

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