The Standard Formula (Skadden, Arps, Slate, Meagher & Flom LLP)

This episode of “The Standard Formula” podcast launches the “Back to Basics” series, which will comprehensively cover the U.K.’s Solvency II regime. For the premiere episode, Skadden partner Rob Chaplin and associate David Wang delve into the intricacies of own funds, a core concept of Solvency II.

Own funds constitute an insurer's regulatory capital, comprising both balance sheet and limited off-balance sheet items. This discussion covers the three classification categories for own funds: Tier 1 (highest quality), Tier 2 (middle) and Tier 3 (broader spectrum and flexibility). Mr. Chaplin and Mr. Wang outline the specific requirements for each tier. Two characteristics of own funds fundamental to understanding them, namely permanent availability and subordination, are explored in detail.

The episode also includes a discussion of regulatory approvals and notifications and the implications of these concepts on the Lloyd's Insurance Market.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: David Wang  

What he does: David is a financial institutions associate in Skadden’s London office. 

Organization: Skadden

Words of wisdom: “Tier 1 capital is the highest quality and must, therefore, meet the highest standards. There are stringent requirements for a proposed Tier 1 item to meet.”

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

This episode of “The Standard Formula” podcast is a continuation of the Back to Basics series. Skadden partner Rob Chaplin and his colleague Imad Mohammed Nazar focus on reinsurance and risk transfer under Solvency II.

Reinsurance is a crucial aspect of the insurance industry and plays a significant role in mitigating risk. Under the Solvency II regime, insurers are subject to specific rules and regulations governing risk mitigation techniques. Mr. Chaplin and Mr. Nazar discuss the wide array of risk mitigation techniques available under Solvency II, defined by the regime as “all techniques which enable insurance and insurers to transfer part or all of their risks to another party.” 

This episode also includes discussion about the implications of successful risk transfer, the standard formula for an insurer to calculate its solvency capital requirement (SCR) and the eligibility criteria that insurers must meet under Solvency II for risk mitigation techniques to be eligible.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Imad Mohammed Nazar

What he does: Imad is a Trainee Solicitor focusing on financial institutions in Skadden’s London office. 

Organization: Skadden

Words of wisdom: “By engaging in reinsurance, insurers can manage their exposure and maintain a healthy balance between the risks they assume and the financial capacity to handle them.” 

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, Google Podcasts, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

“Insurers are expected to hold eligible owned funds in excess of the Solvency Capital Requirement. There are two main methods of calculating the SCR under Solvency II, the standard formula and internal model methods.”

In this episode of “The Standard Formula” podcast, Rob Chaplin, host and head of Skadden’s Europe Financial Institutions Group is joined by colleague George Belcher to discuss Solvency II’s internal models (IM). Despite a higher cost of development, IMs offer numerous benefits, such as more accurate risk sensitivity, more flexibility and more available data. Rob and George also explore partial IMs, changes to existing models, the PRA approval process and implications of the U.K.'s move away from EU Solvency II standards.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob is the head of Skadden’s Financial Institutions Group in Europe. He primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: George Belcher

What he does: George is European Counsel in the Financial Institutions and Insurance Groups at Skadden. He focuses on insurance-related public and private acquisitions and private equity investments, as well as regulatory issues in the insurance sector. He also frequently advises on matters related to Lloyd’s of London.

Organization: Skadden

Words of wisdom: “A firm may choose a partial IM where a particular aspect of its business does not fit well within the standard formula.”

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

In this episode of “The Standard Formula” podcast, partner Rob Chaplin reviews the International Association of Insurance Supervisors (IAIS) with European counsel George Belcher and associate Feargal Ryan from our London insurance team.They discuss how the voluntary membership organization oversees the global standard for the implementation of principles, standards and guidance. Additionally, they discuss the current focus of the IAIS, future developments and the current issues at play. 

In addition to detailing the IAIS’ three main areas of activity, they discussed how the IAIS fits in with other international bodies. They also discussed the IAIS’ report on the progress of 10 regulatory regimes’ implementation of the association’s framework.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector.  He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Feargal Ryan 

What he does: Feargal advises on a wide range of insurance-related transactions, as well as regulatory issues in the insurance sector. 

Organization: Skadden

Words of wisdom: “The supervisory policy measures are designed to increase the overall resilience of the insurance sector and help prevent insurance sector vulnerabilities from developing into systemic risk.” 

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💡 Featured Guest 💡

Name: George Belcher

What he does: George focuses on insurance-related public and private acquisitions and private equity investments, as well as regulatory issues in the insurance sector. He also frequently advises on matters related to Lloyd’s of London.

Organization: Skadden

Words of wisdom: “Since Solvency U.K. is not regarded as equivalent in any respect, the question then arises how the U.K. will be able to influence and shape the IAIS in the future. It's possible that the U.K. will increasingly view the IAIS as a means of escaping or perhaps shaping EU influence.”

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Solvency II imposes numerous governance requirements on insurers. In this episode of “The Standard Formula” podcast, Skadden partner Sebastian Barling and Rob Chaplin, host and head of Skadden’s Europe Financial Institutions Group, guide insurers through these complex requirements.

They spotlight the Own Risk and Solvency Assessment, or ORSA, a cornerstone component of Solvency II that insurers must use to assess their risks and solvency needs. Sebastian and Rob also detail the Senior Managers and Certification Regime, or SMCR, which applies to insurers in the United Kingdom. The SMCR complements and enhances the governance requirements under Solvency II. They close with an overview of operational resilience and outsourcing requirements.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name:  Sebastian Barling

What he does: Sebastian is a partner in Skadden’s financial institutions regulatory practice. He provides U.K. and EU financial regulatory advice to businesses in the financial services sector.

Organization:  Skadden

Words of wisdom:  “Governance plays a crucial role under both Solvency II and the applicable PRA guidelines. This includes active involvement from senior management and the board to ensure that resilience measures are effective and regularly reviewed.”

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

As part of its departure from the European Union (Brexit), the United Kingdom is moving away from key EU insurance prudential regulatory standards, including by liberalizing the EU Solvency II regime. These reforms can be seen as political as well as regulatory — and if you’re an insurance professional, it is important to understand what these changes mean and how they may impact you. 

The Solvency II regime came into force in the UK in 2016. The government announced a review of the regime in June 2020, followed by a range of proposed amendments this year.

The reformed regime — which will be called Solvency UK — is meant to boost innovation in the sector and assist the government’s drive for investment.

This is the first episode of “The Standard Formula,” a podcast from Skadden covering subjects of interest for UK and European insurance professionals in the Solvency II world. Host Robert A. Chaplin — a partner at Skadden — is joined in this episode by Azad as they discuss the UK’s recently announced post-Brexit Solvency II reforms.

 🗝️ Key Points 🗝️ 

Top takeaways from this episode 

• Risk margin. In the government’s final proposals, the risk margin is reduced, using a modified cost of capital method, by around 65% for life carriers and 30% for non-life carriers.
• Matching adjustment (fundamental spread). There will be no change to the design and calibration of the fundamental spread, save for an increase in risk sensitivity to allow a ‘notched’ approach within credit steps.
• Additional proposals. Other reforms in the final proposals concern MA (including various steps to liberalize the MA eligibility criteria), requirements for UK branches of foreign insurers, the application thresholds for Solvency UK and a new regime for startup insurers.
• The full impact remains unknown. Azad speculates that the reforms will bring a number of market impacts, like a degree of investment in infrastructure and clean energy, a new boost for bulk annuity pension deals, innovative approaches to non-conventional assets and more.

💡 Meet Your Host 💡

Name: Robert A. Chaplin

Title: Partner at Skadden

Practice: Robert focuses primarily on transactional and advisory work in the insurance sector. His practice includes advising on mergers, acquisitions, disposals and joint ventures, in addition to regulatory matters. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Azad Ali 

What he does: Azad leads Skadden’s UK and EU financial services regulation practice, which covers a wide spectrum of sectors, including banking, investment banking, market infrastructure, fintech, asset management, insurance and regulated businesses generally in the London and European markets.

Organization: Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

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From Skadden, The Standard Formula is a Solvency Two podcast for UK and European insurance professionals.

Join us as Skadden Partner Robert Chaplin leads conversations with industry practitioners and explores Solvency Two developments that matter to you.

If you’re enjoying The Standard Formula, be sure to subscribe in your favorite podcast app so you don’t miss any future episodes.

Additional information about Skadden can be found at Skadden.com.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. Skadden is recognized for its deep experience in representing insurance and reinsurance companies and their advisers on a wide variety of transactional and regulatory matters. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

In the second episode in Skadden’s yearlong podcast series on global prudential solvency requirements, host Robert Chaplin and colleague Abraham Alheyali discuss the regulatory regime in Bermuda, a global center for insurance and reinsurance. More than 30 major firms underwrite from the country, and it is the largest supplier of catastrophe reinsurance to U.S. insurers. Rob and Abraham discuss the Bermuda Monetary Authority’s (BMA’s) regulatory approach toward different types of insurers and reinsurers, the four key concepts in Bermuda’s prudential regime, various requirements for capital holdings and investments, and how the insurance industry’s growth and increasing sophistication will likely lead to future regulatory changes.

🗝️ Key Points 🗝️ 

Top takeaways from this episode 

• The History of Insurance in Bermuda: More than 30 major international insurance and reinsurance firms underwrite from Bermuda, making it a global center in the industry, known for its innovative, business-friendly and entrepreneurial approach.
• Key Concepts: The episode breaks down the Bermuda solvency regime’s four key concepts: the Minimum Margin of Solvency, the Bermuda Solvency Capital Requirement, the Enhanced Capital Requirement and the Target Capital Level.
• Private Equity Insurers: The Bermudian market has experienced significant involvement from private equity and alternative asset manager-backed (re)insurers. This trend is expected to continue as Bermuda has emerged as a favored jurisdiction for PE-owned insurers due to a combination of regulatory flexibility, strategic location, and a robust financial ecosystem.
• Regulatory Changes: With the market's growth and increasing sophistication, the episode covers potential regulatory evolution ahead as the BMA adapts to new challenges.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Europe Head, Financial Institutions at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Abraham Alheyali

What he does: Abraham is a London-based associate in Skadden’s Financial Institutions Group. He has experience working on a wide variety of matters, including transactions involving private equity sponsors.

Organization: Skadden

Words of wisdom:  “Along with being highly regarded from a regulatory perspective, Bermuda’s favorable tax regime allows reinsurers to operate with greater capital efficiency. The island’s history of innovation in insurance markets — along with the ease of doing business there — also makes it a popular jurisdiction.”

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In September 2023, the U.K.'s Prudential Regulation Authority (PRA) released its second consultation paper on reforms to the Solvency II regime for U.K. insurers. These reforms relate to the use of the Matching Adjustment, a mechanism that adjusts the discount rate that can be applied to the valuation of an insurer’s insurance and reinsurance obligations. 

In this episode of the “The Standard Formula” podcast, host and Skadden partner Rob Chaplin is joined by colleague Theo Charalambous to discuss the intricacies of the U.K.'s Matching Adjustment regime for insurers, including the rationale behind it, which liabilities are eligible, existing conditions and how it’s calculated. 

In case you missed it, be sure to listen to the last episode, which covered groups, and stay tuned as our next installment will focus on investment rules.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures, and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn 

💡 Featured Guest 💡

Name: Theodoulos Charalambous

What he does: Theo is an associate in the Financial Institutions Group at Skadden where he counsels insurers, brokers and private equity sponsors on mergers and acquisitions, disposals, investments, reorganizations, alternative transaction structures and multijurisdictional regulatory matters. 

Organization: Skadden

Words of wisdom: “The Matching Adjustment is an adjustment to the discount rate that can be applied to the valuation of an insurer's insurance and reinsurance applications in certain specific conditions.”  

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

When U.K. insurers observe they cannot comply with requirements under Solvency II, there are detailed steps that one must take.

Feargal Ryan, European counsel in Skadden’s Financial Institutions Group, and host Rob Chaplin, head of the firm’s Financial Institutions Group in Europe, break down insurers’ obligations. They explain differences between the Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR) and examine the Prudential Regulation Authority’s (PRA’s) requirements.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name:  Feargal Ryan

What he does: Feargal advises on a wide range of insurance-related transactions, as well as regulatory issues in the insurance sector.

Organization: Skadden

Words of wisdom: “The first and most critical step is to initiate a frank and open dialogue with the PRA. Once there is any observation of actual or potential non compliance with the SCR, the insurer should detail all material matters impacting upon the insurer's financial difficulty, as well as any matters that may, in the short, medium, and or long term, impact upon the financial condition of the insurer.”

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

As 2024 draws to a close, Rob Chaplin invites colleagues to review a year of change throughout the insurance industry. In keeping with the spirit of a traditional holiday countdown, the team presents 12 topics that spanned the year.

For more Skadden insights about Solvency II, click here for their updated guide, The Standard Formula: A Guide to Solvency II.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

Connect with Skadden

☑️ Follow us on X and LinkedIn.

☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

Following the recently introduced Solvency UK for insurers, the British government has announced the Edinburgh Reforms, which propose various amendments to the UK’s financial services sector. These Reforms are the most significant divergences from the EU’s financial services regulations and are intended to secure the UK's status as a leading financial center.

In this episode of “The Standard Formula” podcast, Skadden partners Robert A. Chaplin and Greg Norman discuss the proposed amendments and their implications for regulatory change. Rather than viewing this extensive list of reformations as similar to the “Big Bang” of the 1980s — the last dramatic transformational financial reforms in the UK — both Robert and Greg consider the Edinburgh Reforms to be a thoughtful change. 

Many of the proposals found in the Reforms are aimed at domestic regulations, such as consumer credit, the bank ring-fencing regime and the senior managers and certification regime.  Additionally, The Reforms are targeted at EU legislation considered to be rigid and burdensome to firms. 

Tune in to hear about the implications of the new Edinburgh Reforms and what it means for the state of the UK moving forward.   

🗝️ Key Points 🗝️ 

Top takeaways from this episode 

• The Edinburgh Reforms are the largest regulatory reforms since the 1980s. When the UK left the EU, the large body of EU legislation that applied directly in the U.K. was transferred onto the UK statute book.
• The Reforms propose a more flexible system. If implemented, the proposed amendments will allow the UK government to construct a new regulatory regime.
• The Reforms are expected to change domestic legislation. An objective of the Reforms is to facilitate the international competitiveness of the UK economy, which includes promoting inward investment; supporting innovation and new developments such as crypto, AI and machine learning; and ensuring the UK is attractive to internationally active financial services firms and activities.

💡 Meet Your Host 💡

Name: Robert A. Chaplin

Title: Skadden financial institutions partner

Specialty: Robert focuses primarily on transactional and advisory work in the insurance sector. He advises on M&A, disposals, joint ventures and regulatory matters, particularly those involving UK and EU Solvency II. 

Connect: LinkedIn 

💡 Featured Guest 💡

Name: Greg Norman 

What he does: As an investment management partner at Skadden, Greg focuses on advising private capital businesses on their formation and operations, including private fund capitalization and structuring. 

Organization: Skadden

Words of wisdom: “Even though the announcement covers a wide spectrum of areas, the proposals are at varying stages of maturity, ranging from the creation of task forces, specific commitments, and announcing certain reviews to cause for evidence and consultations.”

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Host Rob Chaplin and Skadden colleague Caroline Jaffer debut the first episode of a yearlong series on global prudential solvency requirements, which will form the basis of the forthcoming Encyclopaedia of Prudential Solvency publication. In this episode, they discuss the International Association of Insurance Supervisors’ (IAIS’) December 2024 adoption of the Insurance Capital Standard (ICS), which Rob notes is a “watershed moment” in global insurance regulation. Rob and Caroline outline key components of the IAIS and the ICS, as well as detail what supervisory authorities and internationally active insurance groups (IAIGs) can expect next regarding the ICS.

🗝️ Key Points 🗝️ 

Top takeaways from this episode

• The IAIS’ Regulatory Standards: The IAIS adopts three tiers of regulatory standards: Insurance Core Principles (ICPs), the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) and policy measures for global systemically important insurers.
• The Insurance Capital Standard (ICS): Adopted by the IAIS in December 2024, the ICS is a measure of capital adequacy for IAIGs. It is made up of three components:  valuation, capital resources and capital requirements.
• What’s Next for the ICS?: In 2025, the IAIS will begin developing a detailed ICS assessment methodology, which it will use to determine implementation, with in-depth targeted jurisdictional assessments targeted for 2027.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name:  Caroline Jaffer

What she does: Caroline has extensive experience working on insurance matters and liaising with regulators in the U.K. and internationally, having practiced in the U.K. and the Middle East.

Title: Caroline is an associate in Skadden’s Financial Institutions Group.

Words of wisdom: “When setting out how insurers should value their assets and liabilities, supervisory authorities should adopt a regulatory standard at least as stringent as Market-Adjusted Valuation (or MAV).”

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The U.K.’s investment rules for insurers and reinsurers have become particularly interesting due to recent proposals for reform relating to U.K. sovereignty and the ESG movement.  

In this episode of “The Standard Formula” podcast, host and Skadden partner Rob Chaplin is joined by colleagues Ben Lyon and Verena Mengis. Tune in as Ben and Verena delve into a wealth of topics, including the prudent person principle (PPP) in the context of the U.K.'s Solvency II investment rules. Discover the key aspects of PPP and how it applies to insurers' and reinsurers' asset portfolios. Learn about investment rules specific to derivatives, securitizations and assets held to cover linked policies, along with related regulatory changes and their impact on the insurance sector. The episode concludes with a critical discussion on sustainability risks and the integration of ESG concerns into investment rules.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures, and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Ben Lyon

What he does: Ben is a counsel in the Financial Institutions Group at Skadden, where he focuses his practice primarily on transactional and advisory work in the insurance sector. He has extensive experience working on insurance and asset management-related public and private mergers, acquisitions and joint ventures, reinsurance transactions, regulatory matters and investigations, corporate governance issues, debt and equity capital markets transactions and other corporate matters in the U.K. and internationally.

Organization: Skadden

Words of wisdom: “The PRA expects that an insurer's response to financial risks from climate change be proportionate to the nature, scale, and complexity of their business, and that their approach to managing the financial risks from climate change will mature and will develop over time.”

Connect: LinkedIn 

Name: Verena Mengis

What she does: Verena is a trainee solicitor in the Financial Institutions Group at Skadden. 

Organization: Skadden

Words of wisdom: “Since Solvency II came into force, a less prescriptive, but more market favored regime applies to investment rules, to which the prudent person principle is central.”

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In this installment of The Standard Formula’s series on Solvency II, host Robert Chaplin and Chiara Iorizzo unpack the regime’s public reporting element. As Rob explains, public reporting “bolsters transparency and market discipline across the insurance industry.”

Rob and Chiara cover requirements of the Solvency and Financial Condition Report (SFCR) and discuss some proposed changes to these reporting requirements. They also explore external audit requirements and review the role of the European Insurance and Occupational Pensions Authority (EIOPA) in information disclosure.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Chiara Iorizzo

What she does: Chiara is an associate in Skadden’s Financial Institutions Group.

Organization: Skadden  

Words of wisdom: “The purpose of the SFCR is to provide stakeholders, like policyholders and regulators, with a comprehensive overview of the insurer’s solvency and financial condition.”

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

This episode of the “The Standard Formula” podcast is the fourth in the “Back to Basics” series focusing on developments in the Solvency II regime. Skadden partner Rob Chaplin is joined by colleague Feargal Ryan to explore the complexities of group supervision under Solvency II.

Rob and Feargal begin with a discussion of the circumstances under which the U.K. Prudential Regulation Authority (PRA) rules on group supervision will apply to a group, followed by a look at methods for calculating group solvency. They also cover how own funds requirements operate at a group level, and conclude the discussion by considering the application of group supervision at group level under various scenarios.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures, and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn 

💡 Featured Guest 💡

Name: Feargal Ryan 

What he does: Feargal is an associate in the Financial Institutions Group at Skadden where he advises on a wide range of insurance-related transactions, as well as regulatory issues in the insurance sector.

Organization: Skadden

Words of wisdom: “For group supervision purposes and group solvency purposes, only Switzerland, Bermuda and the member states of the European Union are deemed equivalent to the U.K. However, it is important to note that no reciprocal determinations have been made by the European Union, which means that member states of the European Union cannot rely on group supervision exercised by the PRA in respect of European Union Solvency II groups that have an ultimate U.K. parent company.”

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

“The Solvency Capital Requirement, or SCR, is designed to protect policyholders by helping to make sure that insurers can survive difficult periods and pay claims as they fall due.”

In this episode of "The Standard Formula" podcast, Rob Chaplin, host and head of Skadden’s Europe Financial Institutions Group, is joined by colleague Will Adams as they take an in-depth look at the Solvency Capital Requirement, one of Solvency II’s most important and complex provisions. The discussion covers the SCR’s key features, risk modules, how it’s calculated and its relationship with the Minimum Capital Requirement (MCR). They also discuss the standard formula (for an in-depth discussion of technical provisions, listen to the previous episode).

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob is the head of Skadden’s Financial Institutions Group in Europe. He primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn 

💡 Featured Guest 💡

Name: Will Adams

What he does: Will is a trainee solicitor in the Financial Institutions Group at Skadden.

Organization: Skadden

Words of wisdom: “The SCR can be calculated by either using the standard formula prescribed by the PRA rulebook and Solvency II, or by using a PRA-approved internal model bespoke to the company concerned.”

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The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

“Technical provisions are crucial, as they form the fundamental basis for assessing the financial stability of insurance and reinsurance plans.”

In this episode of “The Standard Formula” podcast, Rob Chaplin, host and head of Skadden’s Europe Financial Institutions Group, is joined by colleague Mary Bonsu. Rob and Mary delve into the complexities of technical provisions under Solvency II, shedding light on crucial elements such as best estimate of liabilities and risk margins. They discuss factors influencing these elements, such as financial guarantees, future management actions and risk-free interest rate term structures.The conversation also touches on methods to mitigate short-term volatility, and contrasts Solvency II with IFRS 17.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob is the head of the Financial Institutions Group in Europe primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn 

💡 Featured Guest 💡

Name: Mary Bonsu

What she does: Mary is a trainee solicitor in the Financial Institutions Group at Skadden.

Organization: Skadden

Words of wisdom: “Technical provisions can be seen as an insurer's main reserves.” 

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

In the third episode of Skadden's yearlong podcast series on global prudential solvency requirements, host Robert Chaplin and colleague Annabel Smethurst discuss Japan's insurance and regulatory landscape. As the world's fourth-largest insurance market, Japan has become increasingly attractive to foreign insurers due to its mature market, aging population and ongoing regulatory reforms. Rob and Annabel explore Japan's regulatory framework, its evolution from the "financial Big Bang" of the 1990s and the flourishing reinsurance sector that has emerged as the country aligns with international standards such as Solvency II and the Insurance Capital Standard (ICS).

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Annabel Smethurst

What she does: Annabel advises on insurance transactions and regulatory matters, with particular experience in the restructuring of insurance businesses and Solvency II implementation.

Organization: Skadden

Words of wisdom: "Japan's insurance market is becoming increasingly attractive to overseas insurers due to ongoing regulatory reforms aimed at improving financial stability and aligning Japan with international standards."

Connect: LinkedIn

Connect with Skadden

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

This episode of The Standard Formula podcast discusses three emergent insurance resolution regimes that deal with the failure, or potential failure, of insurers. 

Lamya Al-Yazdi, a member of Skadden’s London insurance team, joins Skadden partner Rob Chaplin to discuss the U.K. HM Treasury consultation on the insurer-specific recovery and resolution regime (IRR), the EU Insurance Resolution and Recovery Directive (IRRD) and the proposals outlined in the consultation paper by the Bermuda Monetary Authority.

Starting with the U.K., Rob and Lamya review the four resolution objectives for the IRR. They also discuss the EU’s proposed set of rules for handling insurance company failures. The rules will apply to EU insurance and reinsurance companies covered by Solvency II, EU insurance holding companies and EU mixed financial holding companies.

Finally, they review proposals from the Bermuda Monetary Authority (BMA). The first proposal involves the implementation of recovery planning regulations to aid insurers in proactively addressing adverse scenarios, enabling them to make informed decisions and develop credible survival strategies for severe stress situations. The second proposal suggests that the Bermuda Monetary Authority could mandate insurers to undertake recovery planning measures.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Lamya Al-Yazdi

What she does: Lamya is a trainee solicitor focused on financial institutions and insurance.

Organization: Skadden

Words of wisdom: “The BMA will use specific criteria as a guide for determining which insurers will require a recovery plan, subject to appropriate proportionality, and risk analysis.” 

Connect: LinkedIn 

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, Google Podcasts, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

In our latest installment of “The Standard Formula” podcast, partner Rob Chaplin and associate Ilianna Kotini  discuss the proposals made in the Bermuda Monetary Authority's (BMA) latest consultation paper, which are focused on the BMA’s plan to enhance the regulatory and supervisory regime for commercial insurers and insurance groups. 

The proposals cover four main areas: changes to the calculations of insurers’ technical provisions, amendments to the computation of the Bermuda Solvency Capital Requirement (BSCR), enhancements to the prudential rules and reporting forms set out in the BMA's section 6(d) framework and revisions to the fees charged to life insurers regulated by the BMA. 

The BMA's proposals aim to bring the Bermuda regime closer to Solvency II, and are of interest to the entire insurance market, given the amount of business that is reinsured into Bermuda.

🗝️ Key Points 🗝️ 

Top takeaways from this episode 

★ Technical Provisions Changes

★ BSCR Enhancements

★ Amendments to Section 6(d) Framework

★ Fee Increases for Long-term Commercial Insurers

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance

Specialty: Rob advises on mergers and acquisitions, disposals, joint ventures and regulatory matters, particularly with U.K. and EU Solvency II. He primarily focuses on transactional and advisory work in the insurance sector.

Connect: LinkedIn

💡 Featured Guest 💡

Name: Ilianna Kotini

Title: Associate, Financial Institutions

Words of wisdom: The BMA's proposals are intended to ensure that the regulatory regime for commercial insurers, regulated in Bermuda, continues to be sound and that the rules in place serve the dual purpose of protecting policyholders while also contributing to financial stability. These changes bring the Bermuda regime closer to Solvency II. The changes are of interest to the entire insurance market, given the amount of business which is reinsured into Bermuda. Clearly any strengthening of the regime may have consequences for insurers and reinsurers worldwide, particularly as to pricing.

Connect: LinkedIn

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The Standard Formula is a podcast by Skadden, Arps, Slate,...

In this episode of “The Standard Formula” podcast, which focuses on Solvency II developments, Skadden partner Rob Chaplin is joined by colleague Olivier Peeters to discuss the U.K.'s change in control regime for insurers and insurance brokers.

Rob and Olivier delve into the concept of a “controller” as defined in the U.K. Financial Services and Markets Act 2000 and the obligations that the U.K. regime imposes on controllers looking to acquire a regulated firm. 

More specifically, they discuss the controller application process required for regulatory approval before closing a transaction, the assessment of applications to determine whether the incoming controllers are fit to control the business of a regulated firm and the obligations of controllers. They also discuss a recently released consultation paper by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) proposing that the existing European Union guidelines on changing control approvals be replaced by U.K.-specific rules and guidance.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures, and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn 

💡 Featured Guest 💡

Name: Olivier Peeters

What he does: Olivier is an associate in the Financial Institutions Group at Skadden, where he advises insurers, brokers and private equity sponsors on mergers and acquisitions, disposals, investments, reorganizations, alternative transaction structures, multijurisdictional disputes and regulatory matters.

Organization: Skadden

Words of wisdom:  “Usually, when a buyer enters into an agreement to acquire a target, it is free to complete the acquisition at a time that the parties agree. But when you're buying an insurance company, or an insurance broker in the U.K., you will always need regulatory approval to complete the acquisition.”

Connect: LinkedIn 

Connect with Skadden

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, Google Podcasts, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

Host Robert Chaplin and guest James Pickstock cover the Solvency II supervision framework, which is designed to protect policyholders and promote insurer soundness. They focus on the Regular Supervisory Report (RSR), a quantitative tool that is among four key areas that insurers must disclose to supervisors. Robert and James also look ahead to legislative reform effective at year’s end.

Watch for our next episode, which will focus on the Solvency and Financial Condition Report, another key area that must be reported to supervisors.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: James Pickstock   

What he does: Based in London, James is an associate in Skadden’s Financial Institutions Group.

Organization: Skadden

Words of wisdom: “The U.K. reforms take effect from the 31 December, 2024. Under both the U.K. and EU frameworks, insurers that don’t exceed the new increased thresholds will continue to be able to operate under the Solvency II regime, should they wish to, by applying for a voluntary requirement.”

Connect: LinkedIn

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

This episode of “The Standard Formula” podcast is part three of the “Back to Basics” series, which takes a deep dive into the Solvency II regime. Skadden partner Rob Chaplin is joined by his colleague Meher Pahuja to discuss third-country branches and the cross-border provision of services. 

Rob and Meher explore the significance of third-country branches and the cross-border provision of services, shedding light on the regulatory landscape before and after Brexit. They emphasize the importance of these topics, discussing “passporting” and pre-Brexit regulations. They also provide insights into the post-Brexit environment, explaining the Temporary Permissions Regime (TPR) and the Financial Services Contracts Regime (FSCR) in the U.K., in addition to briefly covering the contingency arrangements implemented by the EU.

Later in the episode, Rob and Meher analyze the Prudential Regulation Authority’s (PRA's) proposals to remove capital requirements for third-country branches, and highlight the PRA's efforts to encourage competition and protect customers in the U.K. insurance market.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Meher Pahuja

What she does: Meher is a London-based trainee solicitor at Skadden, focusing on financial institutions.

Organization: Skadden

Words of wisdom: “What is clear from all these consultation papers is that the PRA is taking significant strides to encourage competitiveness and growth in the U.K. market while protecting customers.”

Connect: LinkedIn 

Connect with Skadden

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, Google Podcasts, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

Because strategically allocating assets and managing investments are key to an insurer’s business, valuing assets and liabilities is an important area of focus.

In this episode of “The Standard Formula,” host Rob Chaplin, head of Skadden’s Financial Institutions Group in Europe, is joined by associate Olivier Peeters for a conversation about Solvency II’s requirements for asset and liability valuation. Rob and Oliver cover the general principles and specific rules for some balance sheet items and explore recent trends regarding investments into illiquid, or alternative, assets.

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner, Insurance at Skadden

Specialty: Rob primarily focuses on transactional and advisory work in the insurance sector. He advises on mergers and acquisitions, disposals, joint ventures and strategic reinsurances. He also counsels on regulatory issues, with an emphasis on Solvency II. 

Connect: LinkedIn  

💡 Featured Guest 💡

Name: Olivier Peeters

What he does: Olivier advises insurers, brokers and private equity sponsors on mergers and acquisitions, disposals, investments, reorganizations, alternative transaction structures, multijurisdictional disputes and regulatory matters. 

Organization: Skadden

Words of wisdom: “Where quoted market prices are not readily available, insurers should be prepared to justify their valuation approach to the regulator. For insurers that routinely invest in illiquid assets, it may also be necessary to establish and document evaluation framework and relevant valuation procedures. This is particularly the case in a matching adjustment context.”

Connect: LinkedIn

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☑️ Subscribe to The Standard Formula on Apple Podcasts, Spotify, or your favorite podcast app.

The Standard Formula is a podcast by Skadden, Arps, Slate, Meagher & Flom LLP, and Affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.

In its simplest form, a prudential solvency regime is designed to ensure insurance policyholders are compensated while allowing insurers to remain competitive and not unnecessarily over-capitalized. The three most significant prudential solvency regulatory regimes globally are Solvency II in the EU and U.K., U.S. risk-based capital (RBC) and the Bermuda Solvency Capital Requirement (BSCR).

There are commonalities among the regimes, and they all reflect three main elements: companies need to be conservative in their estimate of liabilities; calculations need to force insurers to invest in assets with an appropriate liquidity and risk profile; and companies must finance an excess of such assets with sufficient capital. Applying each of the requirements alongside real-world complexities often presents a challenge to insurers when looking at each company’s individual business practices.

New York-based Skadden partner Patrick Lewis and Neil Horner of ASW Law in Bermuda join host Robert Chaplin to review and compare the various regimes.

🗝️ Key Points 🗝️

Top takeaways from this episode 

★    Understanding Solvency II

★    Regulation in the U.S. 

★    Credit ratings are particularly important for Bermuda insurance industry

💡 Meet Your Host 💡

Name: Robert Chaplin

Title: Partner at Skadden

Specialty: Robert advises on mergers and acquisitions, disposals, joint ventures and regulatory matters, particularly with U.K. and EU Solvency II. He primarily focuses on transactional and advisory work in the insurance sector.

Connect: LinkedIn

💡 Featured Guest 💡

Name: Patrick J. Lewis

What he does: Patrick represents acquirers, sellers, targets and financial advisors in a wide variety of transactions, including public and private mergers, acquisitions, dispositions (including auctions), joint ventures, reinsurance, shareholder activism, capital raising transactions and other corporate matters. In recognition of his work, he was named a Rising Star by The Legal 500 US and IFLR1000. Patrick also has received a Burton Award for distinguished legal writing, one of the highest literary honors in law.

Organization: Skadden

Connect: LinkedIn

💡 Featured Guest 💡

Name: Neil Horner

What he does: Neil joined ASW Law in 2003, prior to which he worked for leading law firms in London, New York and Frankfurt. He is a qualified lawyer in Bermuda, England and New York, with extensive experience working on large commercial, financing, corporate finance and corporate insurance transactions.

Organization: ASW Law

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