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Solvency II is a regulatory project that provides a risk-based, economic-based and principle-based framework for the supervision of (re)insurance undertakings. It acknowledges the main characteristics of the (re)insurance sector by building upon them. In Solvency II, capital requirements will be determined on the basis of the risk profile of undertakings, as well as on the way in which such risks are managed, therefore providing the right incentives for sound risk management practices and enhanced transparency.