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Executive's Guide to Solvency II


Your complete, no-nonsense guide to Solvency II

Solvency II is a well-thought?out regulation, carrying an implication for transforming the European insurance industry to a common set of standards and principles, and in so doing, creating a more stable insurance industry. Full of valuable guidance, Executive's Guide to Solvency II keeps you current on the latest developments regarding this important regulation.

This well-written primer will challenge your concept—or preconception—of Solvency II, providing an introductory look at its potential impact on the European insurance industry. Authoritative, comprehensive, and insightful, it provides an inside look at:

  • The evolution of insurance

  • Insurers' risks

  • Why Solvency II originated

  • How it compares to Basel II

  • Regulation in context of the credit crisis

  • The economic balance sheet

  • Internal models

  • The goals of Solvency II

  • The expected complexities of Solvency II

  • The benefits of Solvency II

  • What your business needs to do to achieve implementation

With real-world guidance addressing pitfalls that may arise, Executive's Guide to Solvency II expertly explains how Solvency II will work to your business's advantage as a best practice risk management framework and a future regulatory compliance requirement.

David Buckham is the founder and president of Monocle Solutions, an international risk assessment and optimization company that provides various products and consulting services by way of intellectual property.

Jason Wahl is head of research at Monocle Solutions. His areas of interest include regulation of financial institutions and financial stability.

Stuart Rose is Global Insurance Marketing Manager at SAS Institute, a market-leading business intelligence and analytics software vendor. He has worked for a variety of software vendors where he was responsible for marketing, product management, and application development.



Chapter 1: The Evolution of Insurance.

Risk Perception.

Early Risk Instruments.

Role of Insurance in Economic Growth and Prosperity.


Chapter 2: Insurers' Risks.

Insurable and Uninsurable Events.

Risk Taxonomy.

Underwriting Risk.

Market Risk.

Credit Risk.

Operational Risk.

Liquidity Risk.

Risk Transfer and Mitigation.


Chapter 3: Solvency II Chronology.

Need for Insurance Regulations.

Why Do Insurers Fail?

Causes of Failure.

Initial Solvency Directives.

Process of the Solvency II Project.


Chapter 4: Learning from the Basel Approach.

Regulation in Context of the Credit Crisis.

Evolution of Banking Regulation.

Application to Solvency II: Regulation.

Application to Solvency II: Business Logic.

Lessons from the Credit Crisis.


Chapter 5: The Solvency II Directive in Brief.

What Is Solvency II?

Solvency II Is Principles Based.

Partial and Internal Models.

Economic Capital.

The Economic Balance Sheet.

Structure of the Directive.


Chapter 6: The Economic Balance Sheet.

Total Balance Sheet Approach.

Quantitative Stipulations of the Level 1 Text.

The Standard Formula.

Non-Life Underwriting Risk Module.

Market Risk Module.

Default Risk Module.


Chapter 7: Internal Models.

Complexity of Implementation.

Definition and Scope of Internal Models.

Internal Models Application.

Tests and Standards.


Chapter 8: People, Process, and Products.

Key to a Successful Solvency II Project.




Data Management.

Risk Analysis.



Chapter 9: Business Benefits.

Regulation Past and Present.

Benefits of an Enterprise Data Management Framework.

Benefits of an Economic Balance Sheet.

Benefits in Perspective.

Benefits beyond Solvency II.




Selected References.

About the Authors.