- Professional News
- 22 August 2014
Lloyd's changes its minimum standards
In future, new minimum standards are applied at the international insurance market Lloyd's of London in order to comply with a new EU directive.
With its minimum standards, the international insurance market Lloyd's establishes a set of principles of good practice for the insurance industry. The minimum standards were created in 2005 and have changed little over the years.
But on 1 July 2014, Lloyd's announced revised standards, which are in accordance with the new Solvency II Directive.
The new minimum standards will come into force on 1 January 2015.
See the revised minimum standards.
More harmonised rules
The Solvency II Directive was adopted in 2009, and it is the most extensive change in the insurance market in more than 20 years.
Solvency II is a consolidation of 14 existing insurance directives and includes a set of new rules as well. The key objectives of the regulation are to ensure adequate policyholder protection, to achieve a level playing field for insurance companies within the single market, to increase the international competitiveness of European insurance companies and to strengthen financial stability following the financial crisis.
Among the new rules to be implemented with Solvency II are rules on capital requirements for insurance companies and pension funds, so that the capital requirements better reflect the risk profiles of the undertakings.
Currently, it is expected that Solvency II will enter into force on 1 January 2016, but it is still uncertain.
Solvency II is based on a so-called economic risk-based approach, intended to reflect as much as possible the actual risk profiles of insurance and reinsurance companies.
The Directive is divided into three pillars:
- Capital requirements (how an undertaking must calculate its capital requirements)
- Supervisory requirements (a set of requirements for the undertakings' risk management systems and supervisory review processes)
- Market discipline (the undertakings are required to report detailed risk information).