modification dateThe European regulations introducing the Solvency II system have a three-level structure, in accordance with the requirements of the Lamfalussy Process applied in the European Union for issuing provisions normalising the functioning of the financial sector.
1) Fundamental legislation, i.e. the framework directive (level 1 legislation), was adopted in 2009 (Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) - Journal of Laws No. 335, 17 December 2009, p. 1) and amended by Omnibus II directive.
2) Level 2 legislation - the directive only normalised the fundamental rules of the system, in many cased leaving the details of solutions to normalisation to the level 2 legislation, that is, the delegated regulations. Of the 312 articles of the framework directive, 25 articles contain compulsory delegations for the European Commission to issue level 2 legislation, and 14 articles contain optional delegations. That number reflects only to a small degree the scope, and thereby the weight and importance, of those regulations.
3) Level 3 legislation - The provisions of the Solvency II system are elaborated in further detail in level 3 legislation. Some of these are non-binding guidelines which apply on the basis of the self-discipline of supervision authorities and market entities, under what is known as ‘comply or explain’ (an entity complies with mutually accepted solutions or, if not, explains why it cannot so comply). Other - in connection with the introduction within the EU in 2011 of what is known as a new architecture of financial supervision - these are issued in the form of legally binding technical standards - BTS - or implementing technical standards - ITS.