Solvency II is the newest compliance issue facing European insurers, setting minimum capital requirements for all lines of insurance. In a recent survey of European insurers conducted by Ernst & Young, Doug French, global director of E&Y's insurance and actuarial advisory service practice, notes 60 percent of the participants see Solvency II as more than just a compliance activity. "They see it as a bridge to enterprise risk management and economic capital concepts," he says.

European insurers are going to use Solvency II to further their movement toward enterprise risk management, French predicts, which will allow them to manage their business and make business decisions based on their view of risk.

As for technology, the biggest focus resulting from Solvency II is on the actuarial systems and actuarial models, asserts French. The current systems and models will have to be rebuilt to deal with the stochastic modeling requirement of the regulatory issue, he indicates. "Most people buy those systems from outside vendors, but the methodologies will change, and you will not be just complying factors to in-force inventories," he says. "You are going to be doing stochastic analysis around the risk elements of your business, and you will be using it to drive a distribution of possible outcomes that will set your economic capital."