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ARTICLE · 14 OCTOBER 2025

Capital Conundrum - EIOPA Expresses Concerns Over Solvency II Amendments

William Fry LLP
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The proposed changes in the Draft Regulation aim to address several challenges in the current Solvency II framework, including excessive sensitivity to short-term market volatility...

IrelandFinance and Banking
Eoin Caulfield
Eoin Caulfield
Ian Murray
Ian Murray
Niall Campbell
Niall Campbell
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July 2025, the European Commission (Commission) published a draft delegated regulation to amend the Solvency II Delegated Regulation (the Draft Regulation).

The proposed changes in the Draft Regulation aim to address several challenges in the current Solvency II framework, including excessive sensitivity to short-term market volatility, disincentives for long-term equity investment, and disproportionate regulatory burdens on smaller insurers.

In summary, the key proposed changes include:

  • Risk Margin Calculation– introduction of an exponential term-dependent factor to boost investment capacity and available capital.
  • Volatility Adjustment– revised risk correction mechanism to better reflect expected losses and credit risk as spreads increase.

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