In the early stages of their internal Solvency II projects many European insurance undertakings chose to focus on the revised capital adequacy requirements. More recently, however, insurers have identified the governance requirements as a major challenge. Small insurers in particular may face difficulties of limited financial resources and a shortage of internal expertise required to prepare for the new Solvency II requirements.
This paper discusses the major elements of an effective governance system as defined by Solvency II and the challenges faced by small insurers in implementing these new requirements. It also describes, in section 4, a governance system checklist currently being developed by the University of Applied Sciences bfi Vienna to aid smaller companies in their implementation of the governance system requirements.