Solvency and Financial Condition Report
A public annual report that every Solvency II undertaking must publish, structured in five prescribed sections, and the only comparable source of prudential information on a European insurer.
Pillar three rests on the idea that verifiable information disciplines better than another rule. The solvency and financial condition report is its main instrument: public, annual, and with a prescribed outline, which makes it comparable across insurers and across years. It has five sections: business and performance, system of governance, risk profile, valuation for solvency purposes, and capital management. Quantitative reporting templates are annexed, including the prudential balance sheet and the SCR breakdown. Its real use goes beyond supervision: brokers, rating agencies, competitors and researchers read the coverage ratio, the composition of own funds by tier, the use of transitional measures and the shape of the reinsurance program. The review adopted in early 2025 splits it in two, one part addressed to policyholders and written to be read, the other addressed to professionals, because experience showed that a single technical document of a hundred and fifty pages informed no policyholder at all.
Articles 51 to 56 of Directive 2009/138/EC, applicable since 2016, with the first reports published in 2017 for the 2016 financial year. In France the reports are published on each undertaking's website and aggregated by the ACPR, which allows coverage ratios to be compared across several hundred entities. The comparison always calls for one precaution: two ratios are comparable only on the same transitional measures and volatility adjustment; otherwise the gap measures the convention rather than the strength.
SFCR, solvency and financial condition report, Solvency II public disclosure
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