This comes as insurers are increasing investments in alternative asset classes, in particular equity release mortgages, which are harder to value, owing to a lack of market price signals and reduced ability to trade.
In a letter to the industry, the Prudential Regulation Authority said the outcome of the review "may lead to a re-assessment of the extent to which firms are complying with the Solvency II requirements", in areas such as asset valuation and the Prudent Person Principle.
"Where the review results in a changed assessment of firms' risk profiles, it may also lead – where applicable – to a reassessment of firm's continued compliance with Solvency II requirements," it added.
The review will cover internal models, the requirement for assumptions underlying the Solvency Capital Requirement and the criteria for matching adjustment eligibility.