A provisional agreement on the proposed updates to the Solvency II Directive has been reached, and whilst the implementation date is still uncertain, the expectation is that implementation will be in early 2026. The changes predominantly relate to addressing previous criticisms regarding the size and sensitivity of the risk margin (reducing the cost of capital from 6% to 4.75%), together with amendments to the calculation of the Solvency Capital Requirements (SCR) involving interest rate risk, symmetric adjustment and long-term equities.
Pillar 2 has also seen new requirements when it comes to governance and risk management, with the latter emphasising the inclusion of cybersecurity, Environmental, Social and Governance (ESG) and climate change risk within the undertaking’s framework.
With respect to Pillar 3 requirements, the amendments will extend deadlines for annual reporting as follows:
Annual QRTs from 14 weeks to 16 weeks
Regular Supervisory Report (RSR) and SFCR from 14 weeks to 18 weeks
Group SFCR from 20 weeks to 22 weeks
Quarterly reporting deadlines are unchanged (5 weeks for solo QRTs and 11 weeks for group QRTs).
Moreover, the layout of the SFCR has been amended to consist of simply two sections - the first addressed to policyholders and beneficiaries, containing only relevant information, and the second part addressed to market professionals, containing more detailed and technical information on the undertaking.
Further details on the abovementioned amendments can be found here.
