siis discussion paper

Download Siis discussion paper

Post on 01-Apr-2016

214 views

Category:

Documents

0 download

Embed Size (px)

DESCRIPTION

Siis discussion paper

TRANSCRIPT

  • An industry-wide challenge

    Solvency II reporting

    Microsoft, Excel, Word, and/or other Microsoft products referenced herein are either trademarks or registered trademarks of Microsoft Corporation. No endorsement by Microsoft Corporation is implied.The XBRL Logo is a registered trademark or service mark of XBRL International, Inc. No endorsement by XBRL International, Inc. is implied.Solvency II Solutions, the Solvency II Solutions logo, Tabular, the Tabular logo, the Tabular interface and other marks are copyright Solvency II Solutions, 2014.

    Solvency II Solutions provides a comprehensive suite of software and

    professional services designed to meet your unique Solvency II reporting

    requirements, based on a foundation of unparalleled market and reporting

    expertise and product excellence.

    Register for full product details at www.solvencyiisolutions.com

    An industry-wide challenge

    Solvency II reporting

    Microsoft, Excel, Word, and/or other Microsoft products referenced herein are either trademarks or registered trademarks of Microsoft Corporation. No endorsement by Microsoft Corporation is implied.The XBRL Logo is a registered trademark or service mark of XBRL International, Inc. No endorsement by XBRL International, Inc. is implied.

    Solvency II Solutions, the Solvency II Solutions logo, Tabular, the Tabular logo, the Tabular interface and other marks are copyright Solvency II Solutions, 2014.

    Solvency II Solutions provides a comprehensive suite of software and

    professional services designed to meet your unique Solvency II reporting

    requirements, based on a foundation of unparalleled market and reporting

    expertise and product excellence.

    Register for full product details at www.solvencyiisolutions.com

  • 1Solvency II reporting an industry-wide challenge Solvency II reporting (the third of the three pillars comprising Solvency II) has taken a back seat to the capital requirements (Pillar 1) and risk management (Pillar 2) requirements up to now.

    The delays in Solvency II implementation allowed insurers to make significant progress in embedding and refining their Pillar 1 and Pillar 2 projects into the businesses, and realise real benefits from these tools.

    Most insurers did not take a similar view to the reporting piece but now as the final implementation date of less than two years away looms large, Pillar 3 is taking a prominent role in insurers implementation plans.

    ContentsSolvency II reporting an industry-wide challenge 1

    Introduction 2

    Increased regulatory demands 2 Increased frequency, scope and granularity 2 Data governance 2 New reporting format 3 Remaining uncertainties 3

    Current status 4 The supervisors 4 Industry 5

    Successful Pillar 3 implementation 6 1. Availability of data 6 2. Co-ordinated technical lead 6 3. Detail quarterly and year-end reporting timelines 6 4. Resource allocation 7 5. Implementation plan 7

    Conclusion 8

  • 2IntroductionThe breakdown in the Solvency II political process at the end of 2012 saw the credibility of the entire Solvency II project called into question. However, successful trialogue negotiations and the publication of the European Insurance and Occupational Pensions Authority (EIOPA) Interim Measures in 2013 put Solvency II back on track.

    The strong majority in the European Parliament in March 2014 for the Omnibus II package confirmed Solvency IIs revival for implementation on 1 January 2016 (albeit with significant transitional arrangements).

    While 2013 saw most insurers pause their non-essential Solvency II workstreams, restarting Pillar 3 projects is now a real focus for much of the industry. This paper looks at the regulatory challenges, supervisors expectations, the industry response and best practices for Solvency II implementation.

    Increased regulatory demands

    Increased frequency, scope and granularity The current level of reporting requirements varies widely across the EU. However, even where the requirements are most onerous, Solvency II will be a huge increase in the disclosure burden.

    This will not be just restricted to the increased frequency, scope and granularity in the reported numbers; insurers will also need to provide an extensive narrative report covering many commercially sensitive topics such as risk profile, risk and capital management systems and controls, key assumptions and performance projections.

    Much of this will also be available in the public filing which provides a further challenge for insurers as the increased transparency is expected to impact share prices and valuations.

    Data governanceSolvency II places a significant emphasis on data management within insurers. A core tenet of the Directive is that data used for calculating technical provisions and use in the internal model must be accurate, complete and appropriate.

    The associated draft delegated acts implement the requirement for a data directory of all technical provisions and internal model source data, a written data policy and appropriate documentation of all material limitations of the data.

    Additionally, Solvency II requires insurers have effective systems and controls in place to ensure that submitted data is accurate and timely.

  • 3New reporting formatIn 2011, EIOPA selected eXtensible Business Reporting Language (XBRL) as the reporting format for Solvency II. Although XBRL has been in use for statutory and tax reporting for several years, the Solvency II taxonomy is of considerably greater scale and complexity.

    The recent experience from the first CoRep reporting (the banking equivalent of Solvency II, which also mandates XBRL reporting) revealed the problems that can occur when implementing a large-scale XBRL project. In early April 2014 the European Banking Authority (EBA) announced it had identified that approximately a quarter of its taxonomy validation rules were incorrect and consequently delayed the submission dates by two months to allow firms to reconfigure their systems.

    Remaining uncertaintiesWhile the reporting requirements are still to be finalised, the reporting elements have been relatively stable for some time now. With the exception of additional group structure disclosures, Omnibus II left Pillar 3 largely untouched. While some changes could still take place, the final published requirements are not expected to make anything other than minor amendments to the drafts already (officially and unofficially) consulted on.

    National-specific templates (NSTs) however are still a genuine uncertainty. Some National Competent Authorities (NCAs) have stated that they wont, at least in the short term, request NSTs, but others, such as the Prudential Regulation Authority (PRA) and the Autorit de Contrle Prudentiel (ACP), definitely will. Little clarity exists presently in this area.

    European Central Bank (ECB) reporting requirements are also still to be decided but it seems likely that when these are formally confirmed, expected October 2014, the ECB will accept the Solvency II reports, at least for the immediate future. However, over time, the ECB is likely to impose additional reporting requirements specific to its needs.

  • 4Current status

    The supervisors

    While many insurers across the EU are still unsatisfied with the level of supervisor interaction, supervisory engagement has shown a marked recent uptick.

    In the UK, firm supervisors at the PRA are said to be engaging much more with insurers and several welcome initiatives have been instigated by the PRA, including the establishment of a Solvency II Reporting working group.

    This small group, with representatives from the Association of British Insurers (ABI), Lloyds, the Investment Management Association (IMA) and a handful of large insurers as well as number of PRA staff, met in December 2013 and March 2014. Detailed notes from each meeting have been published, as well as a Q&A document of questions submitted by industry representatives, which provide useful information on the PRAs position on various industry concerns.

    In Germany, the Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin) provided a very helpful accompanying publication to its comply or explain responses to EIOPAs Interim Measures. As well as providing certainty around the expectations (such as obliging all insurers to participate in the reporting exercise), BAFIN broke down the requirements into 15 thematic blocks and German insurers can expect additional practical guidance on each.

    De Nederlandsche Bank (DNB) included data quality as one of its key focus topics for 2013. Requirements for firms to produce an ORSA-like report has also been incorporated into Dutch law and this report must be submitted from 2014 onwards. Dutch insurers were also required to submit their Standard Formula Solvency Capital Requirement (SCR) for 2013.

    The ACP in France has been perhaps the most aggressive of all regulators in pushing ahead with Solvency II implementation. All French insurers are compelled to complete a full ORSA in 2014 and the first reporting deadlines have been brought forward to September 2014 for all insurers.

    At the European level, EIOPA has set up a Q&A facility for the Interim Measures reporting requirements. Although answers can take some time, due to the fact of it being a European body, market participants are finding this a useful tool.

  • 5Industry

    After the pause in Pillar 3 projects in 2013, project work is now being revisited as firms restart these workstreams. Most insurers are, for now, using internal resources to carry out the gap analyses and related tasks. There is growing confidence in the market that the QRTs published by EIOPA in July 2

Recommended

View more >