Solvency II Delegated Regulation: What the Expected Amendments Mean for Insurers in 2025

The European Commission has published a draft of the 2025 amendments to Delegated Regulation (EU) 2015/35 under Solvency II, aiming to modernize prudential supervision for insurers. These changes – expected to apply from January 2027 – seek to enhance proportionality, improve risk sensitivity, and integrate climate and sustainability risks into supervisory frameworks. 

The draft complements Directive (EU) 2025/2 and reflects the Commission’s commitment to aligning regulation with evolving market conditions and climate-related exposures. While still open for public feedback and not yet in force, the proposed amendments signal a significant shift in how insurers will calculate and manage capital requirements. 

Key Amendments Include: 

• Spread Risk Recalibration: Refined stress testing for bonds and loans, with higher stress values for longer-term and lower-rated instruments. 
• Extrapolation of Risk-Free Interest Rates: New formulas to project long-term liabilities beyond market data, improving accuracy and consistency.
• Risk Margin Methodology Update: Adjustments to better reflect the cost of transferring insurance obligations.
• Long-Term Equity Investment Treatment: Enhanced recognition of long-term equity holdings in capital calculations.
• Volatility and Matching Adjustment Refinements: Improved alignment with actual asset-liability matching practices.
• Interest Rate and Spread Risk Correlation: More granular modeling of interdependencies between risks.
• Natural Catastrophe Risk Recalibration: Updated parameters for flood, hail, and subsidence risks.
• Own Funds Classification: Clarified criteria for classifying capital instruments. 

These amendments are designed to support more accurate risk assessments, foster long-term investment, and ensure that sustainability risks are embedded in supervisory practices. 

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