Commission releases Solvency II directive

BRUSSELS – The European Commission has published its proposal for Solvency II, the regulatory framework for the insurance industry based on the Basel II Accord's three-pillar structure. Under Solvency II, insurance firms will be required to hold capital against market, credit and operational risk, as well as prove they are managing those risks, by the appointment of a dedicated risk supervisor. Previously, insurers had to allow only for insurance risk.

Charlie McCreevy, the European Commission's Internal Market and Services commissioner, said: "This is an ambitious proposal that will completely overhaul the way we ensure the financial soundness of our insurers. We are setting a world-leading standard that requires insurers to focus on managing all the risks they face and enables them to operate much more efficiently. It's good news for consumers, for the insurance industry and for the EU economy as a whole."

The directive contains only the high