Investment Rules Under Solvency II Framework

This guide details the investment rules applicable to insurers and reinsurers under the Solvency II framework in the UK. It outlines the Prudent Person Principle (PPP) and discusses guidance from the European Insurance and Occupational Pensions Authority (EIOPA) and the Prudential Regulation Authority (PRA) regarding its application. The document explains how the PPP allows firms greater investment freedom while ensuring responsible asset management. Specific asset classes are explored, including the relationship between environmental, social, and governance (ESG) requirements and investment rules. The guide also contrasts pre- and post-Solvency II investment frameworks, highlighting the shift from a prescriptive to a principles-based approach. It emphasizes the importance of diversification, risk management, and compliance with regulatory requirements, detailing how firms must assess their investment strategies in line with the PPP. Additionally, it discusses the necessity for ongoing monitoring and due diligence in investment activities, ensuring alignment with policyholder interests and regulatory standards.