Solvency 2 is a European Union directive that harmonizes insurance regulation and supervision across the EU. It is based on three pillars: capital requirements, governance and risk management, and disclosure. Under Pillar 1, insurers must hold enough capital to meet technical provisions and a Solvency Capital Requirement (SCR) that is calibrated to a 99.5% value at risk over one year. Insurers must also meet a Minimum Capital Requirement (MCR). Pillar 2 requires effective governance, risk management, and oversight functions. Pillar 3 mandates public disclosure of a solvency and financial condition report. Implementation is due by October 2012.