Executive's Guide to Solvency II provides an introduction to the Solvency II regulatory framework and what it means for insurers, including:

1. – the choice of whether to use the standard formula approach or apply for partial or full internal model approval,

2. – satisfying the “use test” and other standards required by the new regulations,

3. – implications in terms of the people, processes and systems required to successfully implement a Solvency II project.

As the title suggests, the book is aimed at executives (or anyone else) seeking to gain a good overview of Solvency II and its implications without having to wade through the vast pages of the Solvency II Directive, Omnibus II, etc.

At the time of publication, not all the technical details of the Solvency II rules had been finalised, with discussions and lobbying on-going – for instance, around the use of matching premiums and counter-cyclical premiums. One might therefore ask whether the book's contents are already out-of-date and whether an updated edition will be published. However, given that the book focuses on the main components, underlying principles and rationale of the Solvency II framework and operational implications for implementation – without going into a lot of the technical details – this is not an issue.

The authors provide a compelling argument for the potential benefits to be derived from implementing Solvency II. Not just from the perspective of better policyholder protection and creating a more “level playing field” through harmonised insurance regulation across Europe, but also the potential business benefits to insurers. These include improved strategic planning, risk and performance management and better capability to identify value creating commercial opportunities. Whilst much has been said in the press about the enormous cost to the European insurance industry of implementing Solvency II, Buckham et al encourage executives to make the most of this opportunity to significantly improve the management and operation of their businesses.

The first two chapters provide a general introduction – including a brief history of insurance, its role in supporting economic growth and prosperity, and the taxonomy of risks that life, non-life and health insurers are exposed to – before discussing the Solvency II framework from Chapter 3 onwards.

The third chapter gives a chronology of Solvency II, including discussion of:

1. – the role of regulation and reasons why insurers fail,

2. – the existing regulatory regimes across Europe and their differences,

3. – inadequacies of the Solvency I regime and how they are addressed by Solvency II,

4. – the Lamfalussy process and

5. – key stakeholders (e.g. EIOPA, CEA, CRO Forum, etc.).

The authors then consider what lessons can be learnt from the credit crisis and describe aspects of Solvency II which represent enhancements compared to Basel II.

The next few chapters describe various aspects of the Solvency II framework, including:

1. – an overview of the Solvency II Directive and the 3 pillar approach (i.e. Pillar 1 quantitative requirements, Pillar 2 Own Risk & Solvency Assessment (ORSA) and Supervisory Review Process (SRP) and Pillar 3 disclosure requirements),

2. – the economic balance sheet and Pillar 1 requirements under the standard formula,

3. – internal models, including the approval process, the “use test” to demonstrate that the internal model is embedded in day-to-day decisions and other tests such as statistical quality standards.

In the penultimate chapter, the people, processes and systems required to successfully deliver and implement a Solvency 2 project are discussed. The final chapter concludes with the potential benefits to insurers and other stakeholders of implementing Solvency II. These include:

1. – quicker and better decision making through improved data, management information systems, and risk management,

2. – more efficient and optimal allocation of capital,

3. – better understanding of the relationship between risks, return and profitability across portfolios,

4. – more joined-up and embedded business planning, risk and capital management and performance measurement,

5. – remuneration strategies which better reflect value created on a risk adjusted basis,

6. – greater transparency and consistency in financial reporting across the industry.

In summary, this book provides a useful introduction to Solvency II without going into the more technical details, but focuses on what the new regulations mean for insurers for the day-to-day management of their businesses going forwards and successful implementation of their Solvency II projects. The rally cry is for insurers to enthusiastically embrace the business benefits and improvements that Solvency II offers rather than merely seeing it as a compliance project or box-ticking exercise.