This book provides an explanation of the general principles of insurance supervision under Solvency II and a detailed account of the objectives and background behind the review process under Article 36 of Solvency II.
It also outlines the subject areas involved and addresses the regulatory intervention powers in the context of the supervisory review process. The principles-based approach of the Solvency II regulatory scheme presents new challenges for insurance supervision.
The new supervisory scheme for insurance undertakings has been made dynamic and flexible, but these changes mean there is a conflict between supervision and legal certainty and the foreseeability of official actions. Paradoxically, these changes also increase the level of scrutiny by supervisory authorities. These authorities are primarily concerned with the actual risk status of the supervised undertakings.
Consequently, they must collect and evaluate large amounts of information from insurance firms and occasionally they even have to evaluate the adequacy of measures taken by insurance company managements. This places the supervisory authorities in a position where they are required to make extensive evaluations and give substance to undefined legal terms. It is, therefore, all the more important for the supervisory review process, now widely known as the SRP, to have a clear legal structure.
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