EIOPA completes Solvency II Review mandate with final guidelines and draft technical standards before revised framework takes effect early next year

The European Insurance and Occupational Pensions Authority (EIOPA) published today a total of eight sets of guidelines and draft technical standards relating to the review of the Solvency II framework. With today's publications, EIOPA has delivered all the legal instruments it was mandated to develop under the review, including new guidelines on addressing deficiencies in liquidity risk management, as well as revisions to existing guidelines and technical standards on the calculation of the risk margin and the application of the matching adjustment. These instruments, together with the other legal changes introduced by the review, will apply from 30 January 2027.

Today's package includes one set of new Guidelines on liquidity vulnerabilities, one set of Regulatory Technical Standards (RTS) on the simplified calculation of the risk margin, as well as revisions to four further sets of Guidelines and two sets of Implementing Technical Standards (ITS). The changes respond to the mandates EIOPA received as part of the review, while the revisions ensure that existing instruments are up to date and consistent with the amended legal framework. In developing the instruments, EIOPA also sought to simplify guidelines and provide targeted clarifications where necessary.

New Guidelines on supervisory powers to address liquidity vulnerabilities

The Solvency II Review mandated EIOPA to develop Guidelines on supervisory powers to address deficiencies in undertakings' liquidity management. The new Guidelines set out the form, activation and extent of powers that supervisors may exercise to strengthen the liquidity position of undertakings. They also specify the exceptional circumstances under which supervisors may temporarily suspend policyholders' redemption rights.

Read the Guidelines on supervisory powers to remedy liquidity vulnerabilities

On the simplified calculation of the risk margin

The Solvency II review introduces an exponential and time-dependent element (the so-called "lambda factor") into the calculation of the risk margin to better account for the time dependency of risks and reduce both the amount of the risk margin for long-term liabilities and its sensitivity to interest rate changes. To implement this change, a new RTS was needed to align references in the Delegated Regulation. In addition, as the introduction of the lambda factor directly affects the existing Guidelines on the valuation of technical provisions, these have been updated to reflect the use of the lambda factor in the calculation of the risk margin.

Read the RTS on the simplified calculation of the risk margin

Read the revised Guidelines on the valuation of technical provisions

On the matching adjustment

The Solvency II review will allow undertakings using the matching adjustment (MA) to assume full diversification between their MA portfolio and the rest of the undertaking when calculating their Solvency Capital Requirement (SCR), provided that the undertaking's best estimate of insurance and reinsurance obligations does not form a ring-fenced fund. The revised ITS on the treatment of the matching adjustment ensure consistency with this amendment. The Guidelines on ring-fenced funds have also been updated to ensure consistency with the amended legal framework and to clarify that not all MA portfolios will be treated as ring-fenced funds.

Read the revised ITS on the matching adjustments

Read the revised Guidelines on ring-fenced funds

Further revisions

Amendments to the Solvency II framework also necessitated revisions to the ITS on disclosure templates for supervisory authorities and to two sets of Guidelines, namely those on group solvency and on reporting and disclosure. These instruments have been updated to align with the amended legal framework and simplified where possible.

Read the revised ITS on disclosure templates

Read the revised Guidelines on group solvency

Read the revised Guidelines on reporting and disclosure

Next steps

The draft technical standards published today have been submitted to the European Commission, which will decide on their adoption within three months. Together with the Guidelines published today, they support the implementation of the amended Solvency II framework, which will come into effect on 30 January 2027.