Solvency II provides strong consumer protection and financial stability safeguards
Insurers have remained strong despite the effects of the COVID-19 pandemic and they generally weathered the earlier financial crisis well. Indeed, insurance failures are rare and — unlike bank failures — do not happen suddenly, which allows for a managed wind-down that avoids systemic risk or losses for taxpayers.
The EU’s prudential framework for insurers, Solvency II, is also strong. It includes a ladder of supervisory intervention, so supervisors can already intervene should an insurer breach its solvency capital requirement (SCR), which is significantly higher than its actual minimum capital requirement (MCR).
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