Insurance and Reinsurance Stakeholder Group meeting
12 December 2011

• Development process of EIOPA guidelines and standards on reporting and disclosure
• General framework, objectives and means
• Explanation on narrative reporting and disclosure, quantitative reporting templates, predefined events
• Towards a formal opinion from the Insurance and
Reinsurance Stakeholder Group
2

Due development process:
• on-going work for 2 years (solo) / 1 year (group)
• large involvement of stakeholders resulted in positive feedback
• detailed supporting documents - LOG files and summaries for rationale
2009: 1 st consultation with CP 58
(for solo templates)
Informal consultation from April to
September 2010
Technical meetings with
Stakeholders
Pre-consultation from
January to March 2011
November 2011: EIOPA‘s reporting and disclosure package.
Macro-prudential reporting needs to follow in December 2011.
A stable basis for industry and supervisors to get prepared!
3

Early public consultation by EIOPA on standards and guidelines
Undertakings & supervisors need sufficient time, resources, budget planning for preparation
Necessity to stabilise the content of the templates
OMDII adaptations to scope of the standard should not prevent preparation on stable basis today.
4

• Solvency II Directive contains high-level principles
 Art 35 => supervisory reporting
 Art. 51 to 55 => public disclosure
 Art. 254 § 2 and 256 § 1 => application to groups (mutatis mutandis)
 Art. 256 => single group-wide SFCR
* Omnibus II => scope of Implementing Technical Standards (ITS): templates
• Delegated Act provides details on content & structure of narrative disclosure & reporting, frequency & timelines
 Process : CEIOPS Consultation Paper 58 (2009) => Solvency Expert
Group discussions between COM and Member States, EIOPA (2010 &
2011) => Almost finalised (publication 2012)
5

• Implementing technical standards
 High-priority in OMBII => proposal before Dec 31 st 2012
 Content of quantitative reporting templates under discussion
 Process: Draft by EIOPA, adoption by COM. CP 58 (2009) => 1 st round of informal consultation (2010) => 2 nd round: “pre-consultation” (Q1 2011), incl. meetings with Stakeholders
=> Public consultation by EIOPA started in Q4 2011
• EIOPA guidelines
 Further details on narrative disclosure & reporting, pre-defined events, reporting & disclosure policies
 Process: pre-consultation (Q1 2011) => Public consultation by EIOPA started in Q4 2011 => Adoption by EIOPA expected in 2012
6

• Regular Supervisory Reporting, the RSR
• Objectives :
• Micro-supervision: to perform supervisory review
• Macro-supervision: to give an overall market view
(aggregation & comparison of figures and trends)
• Means:
• Confidential and more detailed information than for disclosure
No supervision without information !
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• Solvency and Financial Condition Report, the SFCR
• Objectives :
• Market discipline: to encourage best practices
• Market confidence: to improve understanding of business
• Means :
• Transparency on solvency & financial position
• Explanation of methods & assumptions used
Wider than current disclosure requirements in many countries!
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Similar structure of narrative RSR and SFCR to enable comparability between undertakings & between the SFCR / RSR
B. Governance and remuneration policy a. Business,
External
Environment and performance
C. Risk Profile
SFCR and
RSR
D. Valuation for solvency purposes
E. Capital management
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A. Business,
Environment and
Performance
B. Governance
SFCR
Underwriting performance (by material
LoB & area);
Investment performance
(Performance is based on statutory accounts)
Governance structure; Fit & proper requirements; Risk management system
(incl. ORSA process); Remuneration policy; Outsourcing policy
RSR
Perceived competition position; Details of performance against projections
Remuneration of members of the administrative & management body;
Outcome of the ORSA; Overview of internal audits performed
C. Risk Profile
D. Valuation
Exposure on off-balance sheet and
SPVs; Summary of risk concentration
Solvency II Balance Sheet; Methods and assumptions; Explanation of material differences with statutory accounts
Detail of risk mitigation techniques used (reinsurance, SPV, etc.)
E. Capital management
Structure, amount and quality of own funds (by tier); Description of material ancillary own funds
Current expectations of SCR/MCR and
OF over the business planning horizon
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Harmonised elements National specificities
Balance sheet
Assets (incl. detailed list)
Variation analysis
Capital requirements
(SCR / MCR) &
Own funds
Technical provisions
(Life & Non-
Life)
Reinsurance
Received in a harmonised format, capable of being shared automatically with EIOPA and/or other supervisory authorities
+
Specific regulations or activities: e.g. distribution of profits, P&I clubs, etc.;
Accounting information
Received in locally-defined format and not automatically shared
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General scope of group templates
Group-specific
Templates
(non-EEA or Solo Templates
(EEA (re)insurance entities) non-insurance entities, IGT, risk concentration)
Group
Templates
Also for sub groups
(when there is sub group supervision!)
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Submission
• All templates are submitted to the supervisor
• Annual for all templates and all undertakings
• Quarterly for “core” solo templates, with simplified presentation & possible exemption in certain cases
• Quarterly for “core” group templates
Disclosure
• Public disclosure of some annual templates, within the scope of the SFCR
• Does not concern quarterly templates
• Possibility of simplified presentation
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Undertakings should submit information to supervisors upon occurrence of pre-defined events
(Art. 35 SII
Directive):
•Examples: emergence of new material risks, internal organisational restructuring, significant operational failures, non-regular ORSA (in case of significant change in risk profile)
•Submission: as soon as possible
•Art. 102 (1): recalculation of SCR if major deviation in risk profile & immediate reporting to supervisor
Undertakings should update their SFCR in case of major developments
(Art. 54 SII
Directive), and at least when:
•Non-compliance with MCR: within 1 month if no realistic recovery plan, or after 3 months if noncompliance not resolved in spite of realistic plan
•Non-compliance with SCR : within 2 months if no realistic recovery plan, or after 6 months if noncompliance not resolved in spite of realistic plan
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Content
Quarterly reporting of the Balance Sheet:
• Rationale by EIOPA: where the reconciliation reserve* cannot be explained sufficiently by the information on assets and liabilities that is reported in other quarterly templates (Assets, TP, OF)].
• Question 1 What would be the criteria for quarterly reporting of the balance sheet? See for example the threshold to be applied (as explained in the summary document of BS-C1)
*
Reconciliation reserve – excess of assets over liabilities that are, to put it simply, not composed of basic own funds and from which the own shares, foreseeable dividends and distributions and ring-fenced funds have been deducted. This could, as far as this was not included in the basic own funds, include expected profits arising from future premiums
15

Variation Analysis templates:
• Developed to show various sources of changes in Basic Own funds, due to business activities, compliance with regulation or “pure” capital moves.
• Attempt for compromise between the original CEIOPS position
(expressed in the 2010 informal consultation) and the counterproposal from certain stakeholders (expressed in the 2011 informal consultation): enable sufficient detail for analysis and comparability, without entailing too significant costs for undertakings in terms of implementation.
• Question 2: what is the view of stakeholders on the feasibility and complexity of calculations, application to groups, etc.
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Risk Concentration reporting through a group-specific template:
• The aim of the risk concentration template: list the most important exposures by counterparty (group or/and entity) outside the scope of the re/insurance group (maximum exposure per contract and if a reinsurer fails; off balance sheet risk concentration). Only the most important exposure by counterparty should be listed. The thresholds could be fixed by the group supervisor after consulting the group itself and the College.
• Question 3 : Should risk concentration exposures be reporting through narrative reporting only, or supported by a specific quantitative template? What should the corresponding guidelines contain in either case?
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Question 4: Are there any practical or operational issues with the application of the reporting and disclosure requirments which can be identified by undertakings?
If any, please describe your concerns and how they could be addressed.
Impact
Question 5: Do you agree with the analysis of the costs and benefits for the implementation of the reporting and disclosure requirements? Are there other costs and negative impacts EIOPA should consider? What benefits may flow from the proposed reporting and disclosure requirements?
For example, what would be the potential impact of ORSA on the pricing, design and availability of insurance products, the corresponding effects for consumers and the wider social or economic impacts even if indirectly?
Other?
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Thank you!