Solvency II – Reporting and disclosure
Insurance and Reinsurance Stakeholder Group meeting
12 December 2011
Solvency II – Reporting and
disclosure
• 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
Development process for standards and
guidelines on reporting and disclosure
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: 1st
consultation
with CP 58
(for solo
templates)
Informal consultation from April to
September 2010
Pre-consultation from
January to March 2011
Technical meetings with
Stakeholders
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
Development process for standards and
guidelines on reporting and disclosure
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
General framework
• 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
General framework
• Implementing technical standards
 High-priority in OMBII => proposal before Dec 31st 2012
 Content of quantitative reporting templates under discussion
 Process: Draft by EIOPA, adoption by COM. CP 58 (2009) => 1st round of
informal consultation (2010) => 2nd 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
Objectives of reporting in Solvency II
• 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 !
7
Objectives of public disclosure in
Solvency II
• 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!
8
Structure of narrative reporting &
disclosure
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
9
Content of narrative reporting &
disclosure
SFCR
RSR
Underwriting performance (by
material LoB & area);
Investment performance
Perceived competition
position; Details of
performance against
projections
B.
Governance
Governance structure; Fit &
proper requirements; Risk
management system (incl.
ORSA process); Remuneration
policy; Outsourcing policy
Remuneration of members of
the administrative &
management body; Outcome
of the ORSA; Overview of
internal audits performed
C. Risk
Profile
Exposure on off-balance sheet
and SPVs; Summary of risk
concentration
Detail of risk mitigation
techniques used (reinsurance,
SPV, etc.)
D. Valuation
Solvency II Balance Sheet;
Methods and assumptions;
Explanation of material
differences with statutory
accounts
A. Business,
Environment
and
Performance
(Performance is based on
statutory accounts)
Structure, amount and quality
10
Current expectations of
Structure of quantitative
reporting templates ( “QRT”)
Harmonised elements
Balance
sheet
Assets (incl.
detailed list)
Technical
provisions
National specificities
Variation
analysis
Capital
requirements
(SCR / MCR) &
Own funds
Reinsurance
+
Specific
regulations or
activities: e.g.
distribution of
profits, P&I clubs,
etc.;
Accounting
information
(Life & NonLife)
Received in a harmonised format, capable of being shared
automatically with EIOPA and/or other supervisory authorities
Received in locally-defined format
and not automatically shared
11
Scope of QRT
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!)
12
Submission and disclosure of
QRT
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
13
Reporting and disclosure upon
occurrence of pre-defined
events
Undertakings should
submit information
to supervisors upon
occurrence of
pre-defined events
(Art. 35 SII
Directive):
Undertakings should
update their SFCR in
case of major
developments
(Art. 54 SII
Directive),
and at least when:
•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
•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
14
Towards a formal opinion of
the IRSG: areas of attention
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
Towards a formal opinion of
the IRSG: areas of attention
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.
16
Towards a formal opinion of
the IRSG: areas of attention
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?
17
Towards a formal opinion of
the IRSG: areas of attention
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?
18
Thank you!