Solvency II equivalence is a concept that allows regulatory cooperation between the European Union and countries outside the EU. It refers to a formal assessment by the European Commission to determine whether another country’s insurance regulatory framework is broadly comparable to Solvency II in terms of objectives, effectiveness, and outcomes. The goal is to facilitate cross-border insurance activities while maintaining strong policyholder protection and financial stability.
Equivalence helps reduce regulatory friction for insurers operating across jurisdictions. When a non-EU country is deemed equivalent, European insurers doing business there may face fewer compliance burdens, such as simplified capital requirements for subsidiaries or branches in that country. Likewise, insurers based in the equivalent country can access EU markets more easily, depending on the form of equivalence granted.
There are different types of equivalence under Solvency II, each serving a specific purpose. These include equivalence for reinsurance supervision, group solvency calculations, and group supervision. Each type enables more efficient regulatory oversight and coordination between EU and non-EU authorities while avoiding double regulation or conflicting rules.
Equivalence does not mean the other regime must be identical to Solvency II. Instead, it must deliver similar levels of policyholder protection and risk sensitivity. The assessment focuses on how well the other country manages capital adequacy, governance, risk management, and supervisory practices. Once granted, equivalence is subject to ongoing monitoring and can be withdrawn if standards are no longer met.
This concept is particularly important for global insurance groups, as it enables smoother group reporting and supervision. It also supports open international insurance markets by recognising strong regulatory regimes beyond the EU. For regulators, it offers a practical way to cooperate with trusted counterparts while focusing resources where risks are greatest.
In summary, Solvency II equivalence promotes regulatory alignment, reduces unnecessary barriers for insurers, and supports consistent supervision across borders. It helps ensure that even outside the EU, high standards of oversight are maintained, benefiting both firms and policyholders.