Regulation on Solvency II

The Ministry of Finance has today adopted a regulation to transpose detailed rules in the Solvency II Directive into Norwegian law. The main elements of the directive have already been transposed into Norwegian law in the new Financial Undertakings Act, which enters into force on 1 January 2016.

The new regulation also includes implementation of the directive’s transitional measures on technical provisions, allowing Norwegian life insurers to adapt to increased solvency requirements over a period of 16 years. The transitional measure may be applied at the level of homogeneous risk groups.

Pursuant to the Financial Undertakings Act, which was adopted by the Storting on 10 April 2015 and will enter into force on 1 January 2016, the detailed rules of the Solvency II Directive (Directive 2009/138/EC) shall be implemented in a regulation from the Ministry of Finance. The regulation shall also implement the directive’s extensive transitional measures as amended by the Omnibus II Directive (Directive 2014/51/EU). The Financial Undertakings Act itself contains rules corresponding to the main elements of the Solvency II Directive.

Today’s adopted regulation is based on a draft regulation prepared by the Financial Supervisory Authority of Norway (Finanstilsynet). The draft regulation included a proposed implementation of Article 308d of the Solvency II Directive, allowing life insurers to apply a transitional deduction to technical provisions based on the difference between technical provisions calculated in accordance with the Solvency II framework and the pre-Solvency II framework. The deduction is to decrease linearly from 1 January 2016 to 1 January 2032. This transitional measure is included in the adopted regulation.

The Ministry’s adopted regulation allows, however, for the transitional deduction to technical provisions to be applied at the level of homogeneous risk groups. This transitional measure will give Norwegian life insurers greater flexibility in adapting to the new solvency requirements. To avoid potential temporary reductions in life insurers’ required technical provisions in the 16-year transitional period, the Ministry has included a floor rule in the adopted regulation, stipulating that technical provisions shall be no lower than what is required under the pre-Solvency II framework when an insurer’s aggregated technical provisions increase under the Solvency II framework.