European and Global Insurance Market
being welcomed as a revolutionary legal
framework which will turn the European
insurance business into a competitive and
prosperous sector.
As of January 1, 2016, the Directive
2009/138/EC of the European Parliament
and of the Council of 25 November 2009 as
amended by the Directive 2014/51/EU of
the European Parliament and of the Council
of 16 April 2014, will be in force throughout
the Member-States of the European Union
(EU). It will replace the Council Directive
87/344/EEC of 22 June 1987, on the
coordination of laws, regulations and
administrative provisions relating to legal
expenses insurance. The new Directive is
titled "On the taking-up and pursuit of the
business of Insurance and Reinsurance" or
in short, "Solvency II."
The new Directive implements a
framework of regulations and technical
standards to be met by insurance and
reinsurance companies established and
operating in any EU member-state in order
to improve their efficiency and particularly,
their risk management. The Directive
is driven by the need to harmonize the
market and to modernize the insurance
industry after its weaknesses were exposed
by the recession that swept through the
EU. Solvency II aims to reduce the risk
of failure of such undertakings to the
minimum i.e. 0.5 percent possibility
of failure. By minimizing the risk of
failure and increasing the efficiency of
undertakings, the Directive will effectively
reduce the undertakings' operational costs
thus enabling them to reduce the basic
premium payable by the policyholders.
The implementation of the Directive is
expected to benefit undertakings outside
the EU as well. Both non-EU undertakings
with EU subsidiaries and EU undertakings
with non-EU subsidiaries will be forced
to incorporate depending on their
corporate structure some of the Solvency
II provisions. In addition, the drastic
changes in the European insurance sector
will encourage undertakings based in third
countries to review their operational and
risk management strategies in order to keep
up with their European competitors.
Solvency II certainly seeks to pave the
way for the insurance single internal market
& Co. LLC based in Limassol, Cyprus. He is an
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