Solvency II is a project of the European Union, mainly pursuing the harmonization of the European insurance supervisory regimes. The Solvency II regulations went into force in Germany and Europe as of January 1st, 2016. The aim is to better coordinate and harmonize the supervision of the insurance market in the EU Member Countries in order to achieve consistent standards within the Single European Market. Pallas Versicherung AG (Pallas) is acting as a so-called Captive-Insurer for the Bayer Group not competing with regular commercial insurance companies. Therefore, a fundamental idea of Solvency II - consumer protection - does not apply to Pallas. However, generally the Solvency II regulations do apply to Pallas. Due to the respective regulations, all European Insurance Companies are obliged to provide a Solvency and Financial Condition Report (SFCR) on an annual basis. Focus of the report is the Solvency Capital Requirement (SCR) and the Minimum Capital Requirement (MCR) of the respective Insurance Company. The reports for Pallas are in German language and can be downloaded here:
Determination of Solvency Ratios
The particular values are determined by means of complex actuarial model calculations. The calculations are based on certain assumptions and intend to incorporate all risks relevant for Pallas and its business modell. These risks are notably the underwriting risks and operational risks as well as risks in connection with the investment of insurance premium in the capital market. The actuarial model calculations result in a Solvency Capital Requirement (SCR)-ratio, demonstrating the capital requirement to be covered by Pallas ́equity capital in case of an extreme scenario (e.g. catastrophe loss covered by an insurance contract underwritten by Pallas, capital market crisis). In case the SCR-ratio is in excess of 100%, it is guaranteed, that Pallas is able to fulfill its respective obligations. In case of a SCR-ratio of less than 100%, Pallas is still able to fulfill its current and future obiligations. However, measures have to be taken to get back to a SCR-ratio of 100% or more. For all Insurance Companies licenced in Germany, this process is monitored by the Germany Insurance Regulatory Authority "Bundesanstalt für Finanzdienstleistungsaufsicht" (BaFin).