The sweeping new legislation will improve the security of policy holders, Finance Ministry State Secretary Irena Sodin said.

Solvency II requires of insurers to factor in all risks in calculating their capital requirements, which includes market, credit and operating risks.

This means that capital requirements will hinge in particular on the distinct risk profiles of individual insurance companies.

Those that manage risks well will be rewarded with lower capital requirements, others with high exposure to risk will need bigger capital buffers.

Sodin acknowledged that the new legislation would increase the burden on insurers in the short term, but in the long term it will benefit the market and the insurers.

Slovenian insurers appear to be well prepared for the transition to the new system and the national insurance watchdog as well as the EU oversight authority believe they will not need additional capital.

Just last week, the European Commission reprimanded Slovenia for failing to transpose Solvency II. It issued a reasoned opinion, the second step in infringement proceedings.