The system of internal controls under Solvency II : an overview

Abstract

Solvency II Directive provides a new quantitative capital requirements regime where all the risks and their interactions are considered, but acknowledges that some risks may only be properly addressed through governance requirements. Therefore, several provisions of the Directive are addressed to set up such a system of governance that includes the establishment of a system of internal controls structured around four key functions. The implementation of this system, however, shall take into account the principle of proportionality. In line with this, and pending the final adoption of the regulatory framework of Solvency II by the EU Bodies, EIOPA has issued guidelines that also apply to this system of governance. They are addressed to the supervisory authorities of the Member States to harmonize how they will apply Solvency II to the undertakings they supervise.