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Navigating the new landscape of captive insurance: Insights from the revised Solvency II Directive

As the Solvency II Directive undergoes significant revisions, the landscape for captive insurance is evolving.

12/08/2025 · 3 minute read

As the Solvency II Directive undergoes significant revisions, the landscape for captive insurance is evolving.

The proposed changes, set to take effect on 1 January 2027, could unlock new opportunities for captive owners, particularly those classified as small and non-complex (S&NC) undertakings.

This article aims to explore these changes in detail, highlighting the key differences and providing practical guidance on how to further explore this topic. Earlier this year, our colleague Bradley Wade wrote an article that provided a foundational understanding of the Solvency II Directive and its implications for captives. In this article, we delve deeper into the practical applications of the proposed changes. By focusing on the operational and strategic advantages that captives can leverage, we aim to provide actionable insights that complement the existing knowledge base.

Understanding the revised Solvency II Directive

The Solvency II Directive, which governs insurance and reinsurance companies within the EU, has been under review since 2020. The recent agreement on updates introduces simplifications and proportionality measures that will significantly benefit small and medium-sized enterprises looking to enter the captive insurance market.

Key changes and their implications

  1. Proportionality measures for S&NC undertakings: Captive owners classified as S&NC will enjoy reduced administrative burdens, including biennial own risk and solvency assessments (ORSA) and extended timelines for reporting. This shift not only streamlines operations but also allows captives to allocate resources more efficiently.
  2. Enhanced risk management framework: The revised Directive emphasises the importance of governance and risk management, promoting diversity within board compositions and allowing for greater flexibility in key functions. This change encourages a more dynamic approach to risk management, which is crucial for the evolving nature of risks faced by captives.
  3. Quantitative adjustments: The reduction of the risk margin cost of capital from 6% to 4.75% is a significant change that will enhance the capital available to captives. This adjustment aligns with similar measures in the UK and is expected to release 'trapped cash,' providing captives with greater financial flexibility.
  4. Transparency and reporting: The new reporting timelines extend the deadlines for annual quantitative reporting and solvency and financial condition reports (SFCR), allowing captive owners more time to prepare comprehensive disclosures. This change is particularly beneficial for smaller captives that may lack the resources of larger entities.

The revisions to the Solvency II Directive represent a pivotal moment for captive insurance. By understanding and embracing these changes, captive owners can position themselves for success in a more favourable regulatory environment. As Marsh continues to support clients through this transition, we encourage captive owners to engage with our experts to explore how these updates can be tailored to their unique circumstances.

For more information on how the revised Solvency II Directive can impact your captive insurance strategy, contact our Marsh Captive Solutions team. We are here to guide you through every step of the process, from assessment to implementation.

Key changes to Solvency II revision

Pillar 1 Pillar 2 Pillar 3
Risk margin revised from 6% to 4.75% General Governance requirements
  • Diversity promotion
  • Independent key functions
  • Renumeration policy
 New SFCR format (qualitative and quantative)
Interest risk Risk management
  • Cybersecurity
  • Liquidity risk management
 AQRTs from 14 to 16 weeks
  • RSR and SFCR from 14 to 18 weeks
  • Group SFCR from 20 to 22 weeks
Equity symmetric adjustment corridor has been expanded from 10% to 13% ORSA
  • Sustainability risks
  • Macroprudential consideration
Nat Cat risk currently being revised

Learn more about the Solvency II Directive

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Our people

Stephen Portelli

Stephen Portelli

Regional Leader, Europe & IMEA, Captive Solutions

Hanna Andren

Hanna Andrén

Senior Vice President, International Captives Business Development Executive