IVASS (Istituto per la Vigilanza sulle Assicurazioni) has recently published a memorandum setting out its considerations on the draft legislative decree (the “Draft Decree”) transposing Directive (EU) 2025/2 (the “Directive”), which amends Directive 2009/138/EC (“Solvency II”).

Through this memorandum, the Supervisory Authority intended to provide its interpretative position on the main regulatory changes introduced by the Draft Decree, also illustrating the objectives underlying the structural reform of the Solvency II regulatory framework.

Purposes and content of the reform

As a preliminary observation, IVASS noted that the latest European legislative initiatives in the insurance sector are driven by a twofold objective: to adapt the Solvency II prudential framework to evolving financial market conditions and emerging risk categories, and to advance the European Union’s broader strategic priorities.

In this context, particular significance is attributed to Action 4 of the Capital Markets Union Action Plan, which seeks to foster long-term investment by insurance undertakings while ensuring that the prudential framework does not impose unwarranted obstacles to the pursuit of those objectives.

The main changes introduced by the revision of Solvency II and, therefore, by the Draft Decree concern:

1. capital requirements – the amendments aim at reflecting more accurately the risks assumed by insurance undertakings, also with the further objective of achieving a release of capital to encourage investment. The internal models for calculating the SCR are revised to ensure a more prudent estimation of risks and to prevent potential underestimation of the capital required to cover them. With regard to the “volatility adjustment” tool, the reform allows its effects to be taken into account, subject to certain conditions, in the calculation of the capital requirement for spread risk. The use of this tool is subject to prior authorisation by the Supervisory Authority and, at national level, the Draft Decree introduces a further condition, requiring the insurance undertaking to demonstrate that its risk profile is consistent with the assumptions underlying the application of the adjustment, and entrusting IVASS with the task of defining, by regulation, the criteria and procedures for such verification;
2.  disclosure and audit obligations – the SFCR (the solvency and financial condition report) is reformed and will be structured into two sections, one intended for policyholders and beneficiaries and the other addressed to professionals. The reform also introduces an obligation, at both individual and group level, to subject the balance sheet included in the SFCR to an audit by the statutory auditor, who shall issue a separate report intended for the supervisory authority. The statutory audit is further extended to additional elements of the SFCR beyond the balance sheet. These audit obligations also apply to small and non-complex undertakings and to captive undertakings. At group level, provision is made for the parent company, subject to prior authorisation by the Supervisory Authority, to submit a single report to the group supervisor and the supervisors of the subsidiaries, incorporating the information relating to each of them;
3. proportionality – undertakings that satisfy certain quantitative and qualitative risk-based criteria may be classified as small and non-complex undertakings and, as such, gain access to the proportionality measures introduced by the reform and the Draft Decree. Those undertakings may benefit from simplifications relating to supervisory burdens (e.g., the calculation of technical provisions and own-risk assessments), corporate governance, reporting and public disclosure. Undertakings that do not fall within that category may also avail themselves of such measures, subject to express authorisation by IVASS;
4.  liquidity risk management tools, macroprudential tools and macroeconomic and macroprudential analyses – the Directive introduces obligations concerning liquidity risk management, requiring undertakings to draw up a short-term liquidity plan and providing for related monitoring by the Supervisory Authority. In this context, the Authority may also: (i) require the preparation of a medium- and long-term liquidity plan; (ii) in cases of severe vulnerabilities in terms of liquidity risk or exceptional sector-wide shocks, adopt timely and temporary measures aimed at strengthening liquidity and preserving the financial position of the undertakings concerned (e.g., limiting or suspending the distribution of dividends and the payment of variable remuneration); and (iii) order the temporary suspension of surrender rights under life insurance policies, in the event of significant liquidity risks and as a precautionary measure of last resort;
5.  supervision of groups, including at transnational level – the memorandum emphasises that the scope of group supervision is extended to include undertakings which, in the Authority’s opinion, are subject to unified management (so-called horizontal groups). In respect of such horizontal groups, the parent company responsible for compliance with group-level requirements must be designated; failing such designation, IVASS shall make it. As under the previous framework, the possibility of excluding certain undertakings from group supervision is maintained, but only in exceptional cases and following consultation with EIOPA. Supervisory powers over insurance holding companies and mixed financial holding companies at the head of a group are also strengthened, with specific obligations being imposed on them concerning the organisation and structure of the group, and with the Authority being empowered to intervene in exceptional circumstances.
6.  cross-border supervision – the principal innovation introduced by the reform in this area is the concept of “significant cross-border activity”, which applies where an insurance undertaking not classified as small and non-complex meets certain premium volume thresholds in the conduct of cross-border activity, or where its activities are deemed significant by the supervisory authority of the host Member State. Where those criteria are met, an enhanced cooperation regime between the home and host authorities is triggered, including through EIOPA collaboration platforms. As regards the obligations imposed on undertakings, the reform intervenes on two levels: at the authorisation stage, information obligations are strengthened by requiring undertakings to disclose any prior refusals or withdrawals of authorisation in other Member States; at the operational stage, an ongoing reporting obligation is introduced for undertakings operating under the freedom to provide services, with a view to ensuring that the home and host authorities maintain a current and comprehensive overview of the relevant risk profile;
7. corporate governance – more stringent requirements are introduced concerning the composition of corporate bodies, with a view to promoting diversity and strengthening fit and proper standards. Risk management and the ORSA (Own Risk and Solvency Assessment) are enhanced through the integration of sustainability factors over the short, medium and long term, together with planning obligations and long-term climate scenario analysis requirements for the most exposed undertakings. In terms of supervision, the Authority’s powers of intervention are strengthened, enabling it to require SCR (Solvency Capital Requirement) add-ons where serious deficiencies in the system of governance are identified and to require the updating and immediate adoption of the measures provided for in the pre-emptive recovery plan, including the suspension or limitation of variable remuneration and the prohibition of dividend distributions.

Finally, IVASS availed itself of the memorandum to draw the national legislature’s attention to an additional matter not directly related to the transposition of the Draft Decree. Specifically, in light of recent events involving a European insurance undertaking operating in Italy in the motor third-party liability insurance class (the DallBogg case), the Authority highlighted potential shortcomings in the current wording of Article 283 of the Private Insurance Code. Under the existing provisions, the Guarantee Fund for Road Accident Victims may only intervene where the undertaking concerned is subject to insolvency or winding-up proceedings. Consequently, the mere withdrawal of authorisation to carry on insurance business – in the absence of the commencement of collective insolvency proceedings – may give rise to a protection gap for Italian injured parties. IVASS therefore recommended that the legislature consider broadening the Fund’s scope of intervention to encompass cases in which the competent authority of the home Member State has withdrawn the undertaking’s authorisation or adopted equivalent measures that effectively preclude the proper handling of claims, even where no insolvency or winding-up proceedings have been formally opened, without prejudice to the Fund’s right of recovery in respect of the sums disbursed.

Final considerations

The Solvency II revision, as transposed in the Draft Decree, pursues a two objective: on the one hand, to simplify the regulatory burdens on undertakings characterised by a less complex risk profile; on the other, to strengthen prudential safeguards in the areas most exposed to systemic, climate, liquidity and cross-border risks. The amendments, as outlined in the sources currently available, are far from negligible and may have substantial impacts on the insurance undertakings to which they apply.