Global Markets Daily: Solvency II Review to Reinforce Benign Sovereign Credit Risk Backdrop

Research evidence excerpt

Global Markets Daily: Solvency II Review to Reinforce Benign Sovereign Credit Risk Backdrop

Economics Research

23 June 2026 | 6:03PM CEST

Global Markets Daily: Solvency II Review to Reinforce Benign Sovereign

Credit Risk Backdrop

n Solvency II is the key regulation for European insurance companies, and the Simon Freycenet

+44(20)7774-5017 |

measures decided as part of its review are to be implemented by 31 January simon.freycenet@gs.com

Goldman Sachs Bank Europe SE - Paris

2027. In today’s Global Markets Daily, we discuss the likely implications for Branch

European rates markets.

n The policy intent of the review – tilting insurance portfolios towards the real

economy – as well as a more favourable treatment of equity exposures imply that

a declining marginal allocation to fixed income going forward is a risk.

n But we argue that the broad sweep of the review will – on net – be positive for

European Government Bonds. Higher sensitivity to long-dated market rates and

an enhanced ability to carry credit risk, combined with wide 30y EGB spreads

against swaps, should in our view all support insurers’ demand for long-end

government bonds.

n As such, we think the review will reinforce the tailwinds to sovereign credit

coming from declining rates volatility, by boosting insurance companies’ ability to

withstand market stress. This is particularly relevant going into next year’s

elections in France and Italy.

Solvency II Review to Reinforce Benign Sovereign Credit Risk Backdrop

Solvency II is the key regulation for European insurers. Introduced in 2016, it sets

capital requirements for insurance companies and shapes their asset and liability

management through valuation principles. A review of this directive was undertaken