FRANCE Trends and Developments Contributed by: Martine Samuelian, Olivier Lyon Lynch and Hugues Vaysset, Jeantet
Revised Solvency II: Proportionality, Sustainable Finance and Macroprudential Challenges of transposition Adopted on 27 November 2024, Directive (EU) 2025/2 amends the Solvency II Directive. It must be trans- posed by EU member states by 29 January 2027. The main changes introduced by this revision are as fol- lows: New method for extrapolating the yield curve for the use of market data These technical adjustments aim to better reflect eco- nomic reality and avoid excessive volatility in capital requirements during periods of low or negative inter- est rates. For life insurers, these changes may have a significant impact on the calculation of the Solvency Capital Requirement (SCR) and the valuation of liabili- ties. Change in the calculation of the risk margin and adjustment of the volatility adjustment calculation These technical changes are intended to better cali- brate technical provisions and reduce artificial volatil- ity in the economic balance sheet. For life insurers, the recalibration of the Volatility Adjustment may improve SCR coverage in periods of credit spread stress. Introduction of measures to support sustainable finance Measures to support long-term investment are being introduced and a distinction between “brown” and “traditional” assets is being established. These provi- sions are intended to encourage insurers to finance the real economy and infrastructure, in line with the objectives of the Capital Markets Union. Establishment of a proportionality regime and review of thresholds for exclusion from the scope of the directive The revision introduces a four-level regime: • Solvency I entities with an increase in the thresh- olds for applying the Solvency II regime. • Entities benefiting from “small and non-complex” (SNC) status, allowing access to proportionality measures while remaining subject to Solvency II. • Entities eligible for certain proportionality measures subject to authorisation by the ACPR.
• Entities that are too complex and significant to benefit from proportionality measures. Automatic measures for SNC entities SNC entities automatically benefit from a package of measures including the accumulation of key functions (excluding internal audit), a five-yearly review of poli- cies, a biennial ORSA, an exemption from short-term LRMP, a simplified SFCR and an exemption from pru- dential audit of the SFCR. The SNC criteria are cumulative and relate to thresh- olds for premiums and technical provisions, an SCR ratio, a share of long-term and savings products, a structure by non-life branches, SCR coverage of more than 100% and an average combined ratio of less than 100%. A notification process is planned, with ACPR oversight and the possibility of opposition in the event of inef- fective governance or SCR risk. Authorisation measures for eligible non-SNC entities Non-SNC entities may request proportionality meas- ures subject to authorisation by the ACPR, provided they comply with general conditions (risk resistance, technical provision and premium thresholds, model complexity, governance) and specific criteria for each measure (spaced RSR/ORSA, short-term LRMP, deterministic calculation of Best Estimate, overlap- SNC notifications and authorisation requests may be submitted from 30 January 2027. In 2025, the Euro- pean Insurance and Occupational Pensions Authority (EIOPA) published a technical opinion approving the SNC criteria and specifying the conditions for granting measures beyond the SNC. For small or medium-sized players wishing to estab- lish themselves in France, eligibility for SNC status or proportionality measures upon authorisation can be a significant competitive advantage, reducing adminis- trative burdens and compliance costs. The ACPR has already organised a webinar in Octo- ber 2025 to familiarise the market with the new pro- ping of key functions). Operational timetable
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