Solvency 2 was implemented in January 2016 and applies to all European insurance and reinsurance companies. It introduced a harmonised risk-based regime for the first time, which is formed under a three-pillar approach. The capital requirements sit under Pillar 1, which deals with the quantitative requirements for insurance companies. These capital requirements are known as the Minimum Capital Requirement and Solvency Capital Requirement, and most commonly referred to as the MCR and SCR.
Key learning objectives:
Define a Solvency II balance sheet
What is the SCR and how is it measured?
What is the MCR and how is it measured?