Social responsibility of Solvency II - the main condition for sustainable developement of insurance market

Abstract

The paper aims to present the importance for insurance industry on undergoing significant legislative changes in the insurance market of Lithuania called Solvency II regime, and how implementation measures can influence sustainability of insurance industry. The main objective of the present paper to analyze basic principles and concepts of Solvency II regime, quantitative and qualitative measures under new Solvency II regime, introducing of the Supervisory Review Process, which will enable supervisors for better and earlier identification of failures, evaluation of insurers’ compliance with the laws, regulations and administrative provisions. The results of study discovered positive relationship between the effectiveness of Solvency II Directive implementation and financial soundness of insurance undertakings. New framework of Solvency II will enhance insurers to develop more progressive risk management system and new possibilities for policyholders related with internal control and internal audit, greater confidence in the products of insurers.