Questions and answers on the Solvency II delegated regulation

Why is there a need to amend the Solvency II Delegated Regulation?

The Solvency II Delegated Regulation (2015/35) supplements the Solvency II Directive (2009/138/EC), by setting out detailed prudential rules for insurance and reinsurance companies in the EU. Directive (EU) 2025/2, which amends the Solvency II Directive, updates the overall framework, with the new rules taking effect on 30 January 2027.

They will

1. help insurers provide more long‑term financing to the real economy, supporting the objectives of the savings and investments union
2. make the rules simpler and less burdensome for smaller and less complex insurers
3. maintain a robust supervisory framework that ensures the stability of the insurance sector and the protection of policyholders

To work in practice, this updated framework needs important clarifications in the Solvency II Delegated Regulation. Without these updates, some current rules would no longer fit the new framework.

What are the core objectives of the amendments to the Solvency II Delegated Regulation?

The European insurance sector manages around EUR 10 trillion of assets and plays a key role as long‑term investor in the economy. The amendments to the Solvency II Delegated Regulation aim to

• encourage long‑term investments by removing barriers that may prevent insurers from financing EU businesses and EU strategic priorities, including the green transition, innovation, security and defence. This is achieved by adjusting overly conservative capital requirements on assets such as equity and securitisations and for insurers’ investments alongside public funds, supporting the savings and investments union agenda
• increase investment capacity by making the valuation of long‑term liabilities less volatile and more predictable, through changes to the risk margin and the ‘long‑term guarantee measures’ (see below). This will facilitate long‑term planning of underwriting and investment activities by insurers. While the actual impact depends on insurers’ investment choices, there is a clear expectation that the additional capacity will be channelled towards investments in the real economy
• preserve the insurers’ ability to offer long‑term life insurance products with guarantees
• reduce administrative burden by streamlining reporting requirements, removing overlaps with other EU rules, and making the framework more proportionate for insurers with simpler business models

Overall, the amendments aim to boost insurers’ investment capacity to finance the real economy, while keeping the insurance sector safe and well‑supervised and ensuring policyholder protection. The Commission will follow up on how capital relief is used.

What are the key items of the amendments to the delegated regulation?

The review of the Solvency II delegated act introduces a number of changes to make the framework more effective, proportionate, and supportive of long‑term investments

• access to the preferential treatment for long‑term equities is simplified, making it easier for insurers to finance European companies, including private equity and venture capital
• changes to the “long‑term guarantee measures” overall help smooth the effect of short‑term market fluctuations on insurers’ solvency positions
• the rules are made more proportionate for smaller or less complex insurers so that they face lighter requirements, while ensuring consistent application across the EU
• supervisory reporting is simplified to reduce administrative burden without compromising effective supervision
• parameters for natural catastrophe risk are updated, and climate‑sensitive assumptions enhance the framework’s resilience to climate‑related risks
• certain rules in the Delegated Regulation are updated in line with the amended Directive (such as changes to the interest rate submodule, or group solvency calculations), thus ensuring that the framework is fully operational when the new Solvency II rules start to apply in January 2027

Who will benefit from the changes to the delegated regulation?

The changes will benefit

• citizens: Insurance policies are an integral part of the daily life of EU citizens, protecting them against risks. Certain types of life insurance policies can also have an investment objective, helping citizens to get better returns on their savings and improve their financial well‑being
• businesses: The draft delegated regulation will ramp up insurers’ investment into the EU economy, allowing EU businesses to innovate, expand and create jobs in the EU. The amendments to the Solvency II Delegated Regulation establish a dedicated treatment for long‑term equity investments by insurers to encourage equity financing of European firms. This measure will play a pivotal role in facilitating investments in private equity and venture capital, which are crucial sources of financing for startups and innovative companies. The draft amendments on legislative programmes will incentivise insurers’ equity investments into EU strategic priorities. Finally, the amendments will contribute to reviving the EU securitisation, by facilitating insurers’ investments in that asset class. A stronger securitisation market will allow banks to provide more loans to EU households and businesses, including SMEs
• insurance companies: By making the framework more proportionate for insurers with less complex business models, the revised delegated regulation reduces administrative burdens and allows those companies to focus resources where they matter most – on delivering value for policyholders

How will these amendments contribute to the overall goals of the savings and investments union (SIU)?

With almost 10 trillion of assets under management, the insurance sector remains a key European institutional investor, which can contribute to the objectives of the savings and investments union (SIU) strategy.

In line with that Strategy, today’s amendments to the Solvency II delegated regulation will facilitate long‑term equity investments, making it easier for insurers to benefit from preferential capital treatment when providing long‑term capital to businesses. The amendments are expected to incentivise insurers to allocate more capital to long‑term investments , supporting the green and digital transition, as well as strategic sectors such as security and defence.

In addition, to support the financing of key Union objectives, a new preferential treatment is introduced for equity investments under legislative programmes. These programmes, established by EU and national laws and accompanied with public subsidies or guarantees, provide financing to businesses operating in specific sectors of the economy. Insurers which invest in equity under qualifying legislative programmes benefit, subject to prior supervisory approval, from favourable prudential treatment for the calculation of their capital requirements. This regime is aligned with banking rules on legislative programmes regarding the eligibility criteria so as to ensure legal certainty and predictability for both the public and private investors.

Finally, by improving the risk sensitivity of capital requirements on securitisations, the reform encourages insurers to invest into this asset class to finance the European economy. A more vibrant securitisation market will contribute to greater credit risk‑sharing in the EU financial system notably between banking and insurance sector, allowing the banking sector to provide additional loans to EU households and businesses.

How do the amendments to the Solvency II delegated Regulation incentivise equity investments?

The amendments to the Solvency II Delegated Regulation establish a dedicated treatment for long‑term equity investments by insurers to encourage equity financing of European firms and facilitate their access to stable, long‑term capital. A preferential risk factor of 22% is applicable to insurers’ investments in long‑term equities, provided that the eligibility criteria set in Directive (EU) 2025/2 and the Solvency II Delegated Regulation are met. For example, insurers must demonstrate that they can hold these equity investments for at least five years without being forced to liquidate their position, even under stressed conditions.

For equity investments made under legislative programmes benefitting from significant public guarantees or subsidies, the preferential treatment will be subject to supervisory approval, in line with a similar regime for banks. The risk factor applicable to equity investments is adjusted in proportion to the quantified reduction in credit risk achieved under the programme. For instance, if the legislative programme reduces credit risk by 20%, the preferential risk factor for long‑term equity (of 22%) would be reduced by the same proportion (4,4% – or 20% of 22%), resulting in an applicable risk factor of 17.6% (22% minus 4,4%).

Why are you proposing to invest in securitisation? How will this work in practice?

In line with the securitisation package presented on 17 June 2025, the draft Solvency II Delegated act aims to remove barriers to investments in securitisation by insurers. By investing in securitisations, insurers can help transfer risks outside the banking sector and facilitate banks’ loans to EU households and businesses, including SMEs. To this end, the Solvency II Delegated Regulation introduces amendments to reduce risk factors on both simple, transparent and standardised (STS) and non‑STS securitisation

• for STS securitisation, the prudential treatment of senior tranches is aligned with that of covered bonds, and non‑senior tranches are adjusted proportionally
• for non‑STS securitisation, senior tranches get a new set of more favourable risk factors, and the risk factors for non‑senior tranches are reduced to better align the ratio of senior‑to‑non‑senior capital requirement with banking rules.

How does this reform support the provision of insurance products with long‑term guarantees, such as life insurance and pension products?

Insurance companies are the main providers of supplementary pensions in many member States. Life insurance or pension policies with guarantees often stretch across several decades, and in some cases the entire lifetime of the insured. Insurance companies need to accurately determine the present value of their liabilities, i.e. their long‑term future obligations towards their policyholders. The Solvency II Delegated Regulation aims at preserving insurers’ ability to offer long‑term guaranteed products, such as life insurance and pensions products.

In particular, the amendments will make the prudential framework more conducive to long‑term insurance business. The review updates key elements used to value insurance liabilities – including the extrapolation, the risk margin, the volatility adjustment (VA) and the matching adjustment (MA) – making insurers’ balance sheet and capital requirements less sensitive to short‑term market volatility. This also reduces the risk of procyclicality of insurers’ capital requirements, i.e. the tendency of capital requirements to overreact to the ups and downs of the business cycle, rather than smooth them out.

Concretely, the draft Delegated Act revises

• the extrapolation of risk‑free interest rates: Insurers are required to use regulatory risk‑free rates, published in implementing regulations adopted by the Commission, to value their liabilities towards policyholders, notably for long‑term guaranteed life insurance and pension products. These risk‑free rates are based on observed market data. However, beyond a certain maturity, market data on long‑term interest rates becomes scarce or unreliable, as the market becomes insufficiently deep, liquid and transparent. Extrapolation is a crucial methodology to infer long‑term interest rates and allow for a stable valuation of insurers liabilities. The draft Delegated Regulation refines the approach for extrapolating risk‑free rates to ensure transparency, predictability, and a stable valuation of liabilities at the date of entry into application of the new rules. Under this new approach, the Commission considers that the starting point of extrapolation for the euro is expected to remain stable at 20 years in the foreseeable future
• the Volatility adjustment (VA): the VA serves as a stabiliser, mitigating the impact of sudden fluctuations in asset spreads (e.g. the difference between sovereign or corporate bond yields and the risk‑free rates) on insurers’ financial positions. It is especially helpful in times of high bond spreads. The Solvency II delegated regulation amends the formula used to determine the structure of the spread underlying the VA, with the objective to enhance insurers’ investment capacity into the real economy, while making sure that the VA is only triggered in case of genuine market stress, and not in response to more lasting market downturns driven by underlying economic fundamentals
• the risk margin: the risk margin ensures that insurers hold enough assets to transfer their obligations to another insurer if necessary, acting as a safeguard for policyholders and financial stability. The application of Directive (EU) 2025/2 will already result in a reduction of the risk margin. This will make insurers’ balance sheet less volatile, thereby enhancing insurers’ capacity to invest in productive investments, and to offer long‑term insurance products, while safeguarding the protection of policyholders in severe stress scenarios. The Solvency II delegated regulation complements the Directive by updating the calculation formula of the risk margin and by introducing a “decay factor”. This decay factor aims at reducing the level of the risk margin and its sensitivity to interest rates for long‑term insurance liabilities
• the matching adjustment: the matching adjustment is a mechanism aiming to mitigate the short‑term volatility in bond spread levels, by acknowledging that an insurer that is holding its fixed‑income portfolio to maturity is less exposed to spread risk. The draft Delegated Regulation improves the functioning of the matching adjustment, and reduces operational burden by removing restrictions to the diversification effects when using the matching  adjustment

Together, these changes will reduce disincentives to hold long‑term assets, improve asset‑liability matching, support stable long‑term returns for insurers, and ultimately make it easier for insurers to offer better insurance products.

How does the delegated regulation improve the proportionality of the Solvency II framework?

The review strengthens the proportionality of the Solvency II framework by ensuring that regulatory and supervisory requirements better reflect the nature, scale and complexity of the risks of each insurance company. The delegated regulation implements the new proportionality regime introduced by Directive (EU) 2025/2 and ensures its consistent application across the Union.

Directive 2025/2 introduces a simplified supervisory regime for insurers classified as “small and non‑complex undertakings” (SNCUs). In practice, insurers that meet a limited set of clear and objective quantitative criteria are automatically granted this label and can benefit from lighter requirements in areas such as governance, reporting, disclosure, valuation of technical provisions, own‑risk and solvency assessment (ORSA), and liquidity risk management planning. The draft delegated regulation complements this framework by specifying some operational details necessary for SNCUs to apply these measures in practice.

Other insurers which may still have a simple business model but do not meet the quantitative thresholds of SNCUs, can also benefit from simplified rules, but only with prior approval from their supervisor. For these cases, the draft delegated regulation sets out a clear, limited and exhaustive list of conditions that supervisory authorities must apply when assessing requests for proportionality measures. These include quantitative thresholds, an assessment of the undertaking’s ability to absorb risks, and confirmation that its business model is not complex. The conditions are tailored to the specific proportionality measure or set of measures requested. This harmonisation improves predictability and the level playing field across Member States, while preserving supervisory judgement.

To ensure consistency within insurance groups, the Delegated Regulation also clarifies how proportionality measures should apply at group level.

Overall, the revised Delegated Regulation creates a transparent proportionality framework that strengthens supervisory convergence, reduces administrative burdens, and allows smaller and less risky insurers to focus resources where they matter most – on delivering value for policyholders and ensuring sound risk management.

Do the amendments to the delegated regulation reduce the reporting burden?

Yes. The review of the Delegated Regulation reduces and simplifies reporting and disclosure obligations, by streamlining content, processes and enhancing consistency across the various reports. This contributes to the objectives of the savings and investments unionstrategy, as well as to the Commission’s burden reduction and simplification agenda This review streamlines the content of both the Solvency and Financial Condition Report (SFCR) and the Regular Supervisory Report (RSR). It removes unjustified or overlapping reporting requirements and aligns their structure with the new provisions of Directive (EU) 2025/2. As a result, insurers will report only information relevant for supervision and market transparency, thereby avoiding duplication and reducing administrative burden.

To address the needs of different audiences, the SFCR is divided into two distinct parts. The section for policy holders and beneficiaries must be concise, accessible, and easy to understand, and may not exceed five pages. The section for market participants will continue to provide more detailed information.

For the RSR, narrative information is limited to what is strictly necessary for prudential supervision, avoiding overlaps with information already reported in quantitative templates or in the own risk and solvency assessment (ORSA).

Finally, for insurers not classified as small and non‑complex, national supervisors may grant approval to reduce the frequency of RSR and ORSA submissions, provided that certain conditions are met. These conditions include robust risk resilience, a non‑complex business model, and compliance with certain quantitative criteria.

How does this reform increase insurers’ resilience to natural catastrophe risks?

As natural disasters and extreme weather events become more frequent and severe, it is important that insurers’ capital requirements for natural catastrophe underwriting risk adequately reflect these growing risks. The review updates the standard formula parameters for various regions and hazards, including floods, windstorms, hail, earthquakes and subsidence.

The updated parameters incorporate the latest scientific data, loss experience and climate change trends into the standard formula. These changes ensure that insurers’ capital requirements are more closely aligned with the evolving risk landscape. They strengthen the insurance sector’s capacity to absorb climate‑related shocks and enhances its long‑term stability and resilience.

How will the use of the enhanced investment capacity resulting from the Solvency II review be monitored?

The review of the Solvency II Directive and the Delegated Regulation will unlock additional investment capacity for insurers, and the Commission expects that insurers will use it to channel more funds into productive investments that support EU businesses and EU strategic objectives, such as the green transition, innovation or security and defence.

EIOPA and national supervisory authorities will monitor how insurers make use of this enhanced capacity, including how they manage their investment portfolios and risk exposures. They will have to regularly assess insurers’ investment strategies, dividend distributions, and variable remuneration practices to ensure that additional capital is effectively directed towards the real economy and not diverted to short‑term shareholder pay‑outs.

To help the Commission track the broader economic impact of the revised framework, EIOPA is required to report regularly to the Commission, the European Parliament, and the Council. The first report is due by 31 December 2028.

What are the consultations that the Commission has done before adopting the draft delegated Regulation?

The draft Delegated Regulation was discussed with Member State experts in the Expert Group on Banking, Payments and Insurance and with the European Parliament. In addition, it was subject to a public consultation to gather stakeholders’ feedback, including insurers and reinsurers, industry and consumers associations, national authorities and other interested parties. The feedback received was carefully analysed and duly taken into account when preparing the final draft of the delegated regulation.

The delegated regulation also builds on the technical work carried out by the European Insurance and Occupational Pensions Authority (EIOPA). Following several formal requests for advice from the Commission between 2019 and 2024, EIOPA provided opinions and technical advice on key aspects of the Solvency II framework. EIOPA’s analyses and recommendations have informed the Commission’s assessment and the preparation of this delegated regulation.

What are the next steps on the delegated regulation?

The Commission will now submit this delegated regulation to the European Parliament and the Council. They will have a period of three months for scrutiny, which can be prolonged by an additional period of three months. The delegated regulation will enter into force unless the European Parliament or the Council raise any objection during their scrutiny period. However, the delegated regulation may enter into force earlier if both the European Parliament and the Council inform the Commission that they will not object to it. The delegated regulation will apply at the same time as the Directive (EU) 2025/2 on 30 January 2027.

Related links

Savings and investments union

Insurance regulation

Implementing and delegated acts under Solvency II