The Solvency 2 regime has had a significant impact on the insurance market, affecting both the offerings and prices of insurance products. The ultimate goal of Solvency 2 is to enhance policyholder protection by requiring insurers to hold the adequate capital in proportion to the actual risk.
Solvency 2 has not necessarily increased the cost of insurance, but it has altered the pricing of risk based on the nature or management of the product. Here are some illustrative examples:
- The required capital has increased for investments in risky assets.
- The required capital has decreased for products that do not offer guarantees, such as Unit-Linked products in life insurance.
- The cost of capital decreases for insurers with diversified activities.
Some effects may be perceived as unfavorable in the short term, as they increase the price of products valued by policyholders, such as Euro funds in life insurance or retirement products. However, in the long term, this regime provides more assurances to policyholders that their insurer will be there when needed. It is a security that comes with a price.
For more details, please contact us.
