Since the introduction of Solvency II in January 2016, our conversations with clients have become much more focused on the volatility rather than the level of the solvency ratio.
The average level of Solvency ratios across countries together with the magnitude of the changes in these ratios between 2016 and 2017 illustrate the volatility challenge. Indeed, 10% of insurance companies across Europe saw their Solvency ratios increase by more than 50 percentage points, while another 10% saw a 20 percentage point decrease.
Insurers can experience dramatic swings in Solvency ratios year on year
Average Solvency ratios (%) for European life and composite insurers by country – 2017*
Source: Solvency and Financial Condition Reports (SFCR), Solvency II Wire; data as at 31 December 2017.
*Incorporates interest rate and equity transitional measures, as well as matching and volatility adjustments.
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