Solvency II Structure

Solvency II follows the standard Lamfalussy process used by the European Union for financial services regulation. This begins with a Level 1 text, a Directive in the case of Solvency II, which sets out the high level core values of the legislation.

Those values are then built-out in Levels 2 and 3; which provide the detailed rules outlined in Level 1, together with standard processes, templates etc. to be used in its application.

Level 4 is the continuous monitoring of national adherence to the EU legislation and the European Commission can take action against a Member State suspected to be in breach.

Legislative texts

Solvency II is still of course an incomplete regime and several of the legislative texts have still to be consulted upon. However, once all the legislation and supporting guidance have been finalised will comprise the following legislative texts:

Level (L)

Purpose Adoption process

L1 – Framework Directive

Must be transposed into national law

Sets out the main principles of Sii; detail established in L2 and L3 European Council and European Parliament adopt final legislation

L2 – Delegated acts (DA)

Directly binding

Detailed rules based on L1 texts Proposed by the European Commission. European Council and European Parliament have veto power to block adoption

L2 – Implementing Technical Standards (ITS)

Directly binding

Sets out the conditions of application (processes, templates etc.) of the DA– concerns purely technical matters Proposed by EIOPA, adopted by the European Commission

L3 – Guidelines

Applicable on comply or explain basis

Further guidance on specific areas of the regulation Proposed by EIOPA. NCAs must comply or explain

L3 – Q&A tool

Non-binding

Clarifications on the intention or meaning of the Guidelines Published by EIOPA