Solvency II: What Captive Insurers Need To Know

The evolving regulatory environment for captive insurance in the European Union is seeing a significant shift with the latest amendments to Solvency II. The directive, designed to ensure financial stability for insurers, has long imposed stringent requirements on captive insurers, often treating them the same as large, traditional insurance companies. In this episode of the Captive.com podcast, Joel Appelbaum welcomes Alex Gedge, senior captive consultant at Hylant, to unpack these changes and what they mean for captives going forward.

A major focus of the amendments is proportionality, ensuring that regulatory requirements are more aligned with the size and complexity of insurance entities. Captives classified as small and noncomplex undertakings (SNCUs) will benefit from streamlined governance, reduced reporting obligations, and lower solvency capital requirements. Additionally, the reduction in the cost-of-capital rate in risk margin calculations allows captives to unlock capital efficiency, freeing up resources for risk management initiatives, expanded coverage, or increased retentions.

Beyond financial considerations, the updated regulatory framework also integrates environmental, social, and governance (ESG) factors, requiring captives to align their investment strategies with sustainability goals. As captives navigate this shifting landscape, staying informed and proactive will be key. Tune in to hear Alex Gedge provide practical insights on how captives can adapt to these changes and leverage regulatory developments to their advantage.