The Solvency II review began seven years ago and the updated regulation will come into force in January 2027. In the meantime, the European Commission published the new directive in January 2025, followed by delegated acts. The technical standards were released in late May and give the details of the risk free curve and volatility adjustment construction as well as how to apply the new interest rate shocks.
This refreshed version of our July 2025 paper incorporates additional details gathered from local regulator conferences and discussions with insurers. We highlight the key changes we identified that will affect insurance balance sheets, from both a solvency and investment standpoint. In our analysis, we have categorised the key changes by asset class. These changes impact various modules of the Solvency Capital Requirement (SCR), including market risk, counterparty risk and the technical provision calculation.
Numerous additional changes proposed in the updated regulation concern liabilities (non-life and catastrophe risks) and reporting standards (the Own Risk and Solvency Assessment (ORSA) and Solvency and Financial Condition Report (SFCR)). However, we have chosen not to cover them in this report as they do not affect investments.