Implications of the Solvency II Review Case Study

This technical report analyzes the anticipated changes to the Solvency II regulations, effective from 2027, and their implications for EU-regulated insurers, specifically through a case study of a hypothetical insurer, EU Insurance AG. The study aims to understand the potential capital relief that could be unlocked, estimated at around 70 billion EUR, and how insurers might adapt their strategies in response to these regulatory changes. It outlines key revisions to the Solvency II Directive, including the Volatility Adjustment, Risk Margin, and Long-Term Equity criteria, and assesses their expected impacts on the solvency ratio of EU Insurance AG. The report details a quantitative model used to estimate cash flows and the solvency ratio under the revised regulations. It also discusses potential management actions that insurers may consider, such as reallocating capital to new products or optimizing asset allocation strategies. The findings suggest that the revisions could significantly enhance the solvency ratios of insurers, providing them with opportunities for strategic adjustments.