Financial Services Lawyers Association

Fundamental review of the capital adequacy regime for the European insurance industry that aims to establish a revised set of EU-wide capital requirements. The framework consists of three ‘pillars’. Pillar 1 sets out the minimum capital requirements firms will be required to meet for insurance, credit, market and operational risk. Pillar 2 will be the supervisory review process – because of this, supervisors may decide that a firm should hold additional capital against risks not covered in pillar 1. The aim of pillar 3 disclosures is to harness market discipline by requiring firms to publish certain details of their risks, capital and risk management.