ACTUARIAL FUNCTIONS UNDER SOLVENCY 2

Solvency 2 is a risk-based capital regime being introduced across Europe. It is intended, among other things, to bring a uniform way of determining capital requirement for insurance entities.
 
In semblance to Basel II, Solvency II is organised into Pillars.

• Pillar 1 regulates the capital requirements. Insurers should be capitalised adequate to the risks of their undertakings, especially regarding their asset allocation and their liabilities, based on mark-to-market accounting. Companies could create internal models to calculate their requirements on an individual basis.
• Pillar 2 demands a higher level of risk management and governance. Besides the capital requirements, this is likely become the biggest challenge for smaller firms.
• Pillar 3 establishes higher standards of transparency.