The European Commission has released its draft Solvency II Delegated Regulation, introducing a significant revision to Solvency II’s framework by aiming to unlock insurer capital for long-term investment, enhance proportionality, and align the regime with Directive (EU) 2025/2.
While the draft is still under consultation, it sends a clear signal. By the time the new rules take effect on January 30, 2027, insurers will need to be ready for a fundamentally different capital and reporting landscape.
Rethinking Capital in a New Economic Context
The EU wants insurers to play a greater role in financing productive investments in the real economy, particularly infrastructure, small and medium-sized enterprises, and the green transition. The draft regulation reflects that intent through targeted capital relief:
- Long-term equity investments will benefit from clearer eligibility criteria and greater flexibility, including fund-level assessment for certain regulated investment vehicles.
- Publicly subsidized or guaranteed equity programs, aligned with banking treatment, will receive preferential capital charges if insurers can demonstrate reduced risk.
- The risk margin formula has been revised to better reflect the time profile of risks, releasing capital that can be redirected toward productive use.
These changes do more than affect solvency ratios. They influence how investment strategies are designed and how data is reported.
A More Risk-Sensitive, Streamlined Framework
Several technical changes are designed to improve how insurers measure and respond to risk:
- Interest rate risk calculations have been updated to allow for negative rates and avoid underestimating exposure in low-yield environments.
- The volatility adjustment mechanism has been recalibrated to reduce artificial swings in solvency caused by short-term spread movements.
- Capital charges for securitisation, especially for senior tranches, have been reduced. This brings Solvency II closer in line with banking regulation and supports insurer participation in risk transfer markets.
In addition, natural catastrophe risk parameters have been revised based on the latest science and claims experience. Direct exposures to central clearing counterparties now receive improved treatment to encourage broader participation in cleared markets.
Proportionality and Reporting Reform
A key development for smaller insurers is the creation of a new category for small and non-complex undertakings. These firms will automatically benefit from simplified governance and reporting rules. Supervisory authorities will apply proportionality based on clear and consistent conditions, improving regulatory predictability.
Reporting itself is also evolving. The Solvency and Financial Condition Report will be split into two parts: one short and accessible for policyholders, and another more technical version for market professionals. The Regular Supervisory Report is being streamlined. Clarifications around foreseeable dividends, share buybacks, and look-through for fund investments should also improve consistency and reduce unnecessary compliance burden.
Implications for Asset Managers
For asset managers supporting insurance companies, this reform is more than a regulatory update. It represents a fundamental change in how capital, assets, and risk are classified and communicated.
Key areas of impact will likely include:
- Asset classification and SCR calculations, particularly for equity, securitisation, and reinsurance exposures
- Data requirements linked to proportionality eligibility and simplified treatment
- Revised templates and disclosures to reflect changes in reporting structure and own funds logic
Insurers will need partners who can adapt quickly, update logic dynamically, and ensure Solvency II Tripartite Template (TPT) and related reporting is aligned with both current and future rules.
What Comes Next
The regulation remains in draft form, and further refinements are possible before adoption. Still, the direction is clear. A more risk-aware and investment-focused Solvency II regime is taking shape.
At iQuant Solutions, we are closely monitoring the evolving Solvency II framework and its potential impact on our clients’ reporting obligations, investment strategy, and capital planning. Our platform is designed to adapt as regulations evolve, ensuring your reporting remains accurate, efficient, and compliant.
If you’re assessing how these proposed reforms could affect your operations ahead of the 2027 implementation date, we’re here to help you navigate the path forward with confidence.
Contact us to start the conversation.
