Solvency Assessment and
Management
Light Parallel Run Questions (FAQ)
Version 2 – Aug 2014
1
CONTACT DETAILS
Physical Address:
Riverwalk Office Park, Block B
41 Matroosberg Road (Corner Garsfontein and
Matroosberg Roads) Ashlea Gardens,
Extension 6
Menlo Park
Pretoria
South Africa
0081
Postal Address:
P.O. Box 35655
Menlo Park
0102
Switchboard: +27 12 428 8000
Facsimile: +27 12 347 0221
Email:info@fsb.co.za (for general queries)
SAM.LightPR@fsb.co.za (for LPR related queries)
Website: www.fsb.co.za
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Introduction
1. Introduction
This purpose of this document is to provide insurers with additional guidance and clarity relating to the
completion of the Light Parallel Run (“LPR”) submissions. The “Frequently Asked Questions (FAQ)” section
has been compiled from questions asked during the various SAM workshops held by the FSB, as well as
from questions asked by insurers directly to the FSB’s SAM Team.
This document is a “live” document, and as such will be updated regularly. Insurers are requested to
forward any questions they may have relating to the LPR templates via e-mail to SAM.LightPR@fsb.co.za .
New versions will be published on the FSB’s website as well as on the SAM portal, and will also be
circulated to the SAM co-ordinators and public officers of all insurers. Insurers should regularly check the
FSB’s website (www.fsb.co.za) or the SAM Portal (sam.fsb.co.za) for any updates to this document. A
version number on the front page of this document will identify the version of the document.
Insurers should ensure that they have run the correction macros on the spreadsheets that were originally
published. Correction macros will be published on the FSB’s website to update the spreadsheets originally
published for the various errata identified in this document. These correction macros will also be circulated
to the SAM co-ordinators and public officers of all insurers.
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2.Spreadsheet
ErrataErrata
/ Clarifications
In terms of the log files, where guidance has been given which is inconsistent with the technical specification or the interpretation intended, these will be
listed in the first table below. Anything that needs to be clarified will also be listed in this table.
The remaining table below list the errata to the LPR spreadsheet. Insurers should not attempt to manually make the corrections, as these will be fixed by
running the correction macro. In this table, the “Potential Impact” is given as an indication of the magnitude of the error on the overall position provided in
the “OF1” tab. However, the actual impact will vary by insurer. It is also important to note that minor issues relating to usability have not been included in
the table below.
Solo LPR Log Files
Tab
TP3.3
Page
Issue
Action
The log file will be amended to include a clarification that “In Force Throughout the Quarter”
does not include cancelled contracts. It only includes contracts that remain in force throughout
the quarter.
2
The "In Force at End of Quarter" takes the value
for the "In Force at throughout the Quarter" and not
"In Force at Start of the Quarter". The issue is that
the "In Force throughout the Quarter" already takes
into account the cancelled contracts. Therefore
including "In Force throughout the Quarter" instead
"In Force at start of the Quarter" may result in
duplicaton of cancelled contracts in the calculation.
Hence the value of In Force at End of Quarter
being understated.
Please clarify the definition of a scheme to use in
completing the number of schemes figures in
TP3.2 - Movement in Group Business.
The log file will be amended to include a clarification that an umbrella fund with many different
participating employers should be treated as a single scheme.
TP3.2
1
Should an umbrella fund with many different
participating employers be treated as a single
scheme or alternatively should each participating
employer be treated as a separate scheme?
OF4
1
The Technical spec states that the revenue
The wording in the LPR log file is incorrect. The LPR templates should be done quarter on
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Tab
Page
Issue
Action
account should be a quarter-on quarter basis, but
the Log file definition for OF4 states that the return
is cumulative and should start from the start of the
financial year to the latest quarter end.
quarter and not cumulative (Thus the LPR technical specification is correct). The log file will
be amended.
Please can you assist with the definition of lead
and follower per LPR TP5.2S.
The log file will be amended to include a clarification that the “Lead” columns should include
contracts on which the reinsurer has the Technical Lead (i.e. where the reinsurer determines
the rates / terms of the contract)
Extract of Log The required information for each pair of columns
discussed below is also split between:
• Lead – The reinsurance provider has the largest
percentage share of the reinsurance contract.
TP5.2S
1
• Follow – The reinsurance provider does not have
the largest percentage share of the reinsurance
contract.
The lead reinsurer determines the terms/rates of
the contract (doesn’t necessarily have the largest
share) the rest of the reinsurers then follow the
terms as laid down by the lead. E.g. a Technical
Lead. Should we classify the technical lead which
may have the smallest share as the “Lead”; or
should we disclose the provider with the largest
share (who is not the technical lead) as the
“Lead”?
TP1S and
OF4.3S
What is the definition of “Foreign” for QRT OF4.3S.
1
- Foreign: “Business will be regarded as foreign if the obligations are discharged outside
South Africa”
What is the difference between recurring and nonrecurring business?
TP3.1
The log files will be amended with the following:
1
The log files will be amended with the following:
- Non-recurring: “All business which is purchased with a single premium or business where
the payment of a series of premiums is not contractual”
- Recurring: “All other business”
Solo LPR Templates – changes affected by running the latest correction macro
Tab
Cells
Issue
Action
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Potential Impact
Tab
Cells
OF2
G46 and
G81
OF4
SCR
G19
L42
OF1
E31
OF1
E14 and
E15
Issue
Action
Potential Impact
The sum of total deferred tax asset and total
deferred tax liability does not include CGT. Hence
the value for CGT is not included in the total
liability figure.
The formula will be corrected to include
CGT.
Low: CGT should not form a significant part of
an insurer’s assets or liabilities.
The sum for total investment income is not
included in the calculation of fair value adjustment
of investments.
The formula will be corrected to include
fair value adjustments of investments.
None: The fair value adjustment of
investments in statement OF4 will not impact
the overall position of the insurer in statement
OF1. However, it will have an impact the
results in statement OF4.
The sheet does not allow you to input the net
capital charge for the previous quarter for Non-SLT
Health underwriting risk. This impacts your
previous quarter diversification value for net capital
for life underwriting risk, impacting your previous
quarter BSCR hence impacting your previous
quarter SCR.
The cell protection will be changed from
“Locked” to “Unlocked”. This will allow the
user to enter an amount.
Medium: The previous quarter BSCR and
SCR will be understated. The significance will
depend on the significance of the Non-SLT
Health Underwriting Risk capital charge
relative to the other capital charges in the Life
Underwriting Risk module.
The MCR value in statement OF1 sums over the
MCR values calculated for Life and Non-Life.
The formula will be corrected by taking
either the Life or Non-Life MCR
depending on the “Insurer Class”
selection made in the “Company
Information” sheet.
High: The MCR will be overstated.
The SCR cover (Cells E14 & E15) should be one
decimal place.
The formatting of the cell will be changed
to show the value to one decimal place.
None: Formatting will not have an impact on
the results.
The cell will be changed to an input cell
rather than a calculation cell.
High: The total Basic Own Funds will be
overstated resulting in overstated capital
coverage ratios.
OF2
G108
On OF2 (Statement of Assets, Liabilities and Basic
Own funds), the " Basic own funds" total (refer to
cell G126) includes both the total for assets as well
as the total for retained earnings, this is in contrast
to the QIS 3 return on which the "Basic own funds"
total (refer to cell E224) only included the retained
earnings for the period. Please advise if the SAM
light parallel return is correct in including both the
total for assets as well as the total for retained
earnings.
TP1S
Q27, R27,
AC27 &
AE27
In tab TP1S, the ULAE (cell P27) is not being
added to any of the totals that occur to the right of
this value.
The formulae will be changed to include
ULAE.
Medium: The technical provisions will be
understated which will cause the capital
coverage ratio to be slightly overstated.
D1 - Assets
C87 & C88
“Less than 1 Quarter” should read “Less than one
The labels will be changed to correctly
None: No figures are affected.
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Tab
Metadata
Cells
CorrMkt
Issue
Action
year”
reflect the CIC definitions.
The light parallel run metadata should include a
market risk correlation matrix where the capital
requirement for nominal level interest rate risk as
determined below, is derived from the capital
requirement for the risk of a level decrease in the
interest rate term structure.
The matrix will be corrected. The final
matrix entries will depend on the
selection item in a drop-down list on
sheet SCR
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Potential Impact
Medium: The diversified capital charge for
Market Risk will be understated in the case
where the capital charge for the nominal
interest rate shock is not based on the upward
shock.
3. Frequently Asked Questions (FAQ)
Frequently Asked Questions (FAQ)
The table below consists of a collection of questions asked by industry directly to the SAM Team regarding
the Light Parallel Run submission. The FAQ has been structured by first giving the tab of the LPR
spreadsheet to which the question relates, followed by the relevant reference in the tab.
Page 8 of 13
Ref. #
Solo / Group
Tab
Reference
Question / Answer
For change in policy liabilities there appears to be no colour, hence it is unclear
whether the value is calculated or is an input
1.
2.
Solo
Solo
OF4
TP5.1S and
TP5.2S
G34
N/A
This value is an input. However, for the first submission of the LPR templates, it was decided that
insurers do not need to calculate the opening balance of the technical provisions. Thus, the change
in policy liabilities is not required for the first submission.
On the parallel run QRT, on sheets TP5.1S and TP5.2S, it asks for earned premium
for current quarter and previous quarter, does this earned premium need to be
calculated on SAM basis? If it does, that means that the premium provisions need
to be restated going back (so for 31/12/2013, 31/03/2014 and 30/06/2014) to calculate
these numbers. Is it okay if we use earned premium calculated based on current
basis for this submission?
Insurers should use the earned premium calculated on the current basis for the first LPR
submission. It was decided that insurers do not need to calculate the opening balance of the
technical provisions for the first submission. Thus, the earned premium on a SAM basis, as defined
in OF4.3S, would not need to be calculated. However, from the second submission onwards, the
earned premium should be calculated on a SAM basis as defined in OF4.3S.
3.
Solo
TP5.1S
N/A
When referring to Direct Business, does this include Group Schemes / Group
Business?
For Non-Life insurers, “Direct Business” includes Group Schemes / Group Business.
4.
Solo
TP3.1
N/A
Does the sheet TP3.1 entitled 'Movement in Individual Business' relate to only Life
Insurers (as suggested by the headings) or should Non-Life Insurers also provide
information in this sheet, for instance, under Lapses?
Yes, TP3.1 only relates to Life insurers.
5.
Solo
TP3.2
N/A
Does the sheet TP3.2 entitled 'Movement in Group Business' purely relate to Group
Schemes / Group Business, whether it by Life or Non-Life Insurers?
No, TP3.2 only relates to Life insurers.
6.
Solo
N/A
N/A
To assist with our planning for the on-going quarterly reporting requirements for
Solo entities, please answer the following question. If an insurer subsequent to the
submission of their quarterly Solo return realises that an error was made in a
revenue account or movements number for that quarter, should the insurer correct
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Ref. #
Solo / Group
Tab
Reference
Question / Answer
this error in their next quarterly submission (provided the second submission falls
within the same financial year as the first submission)? Correcting the error would
mean that, if the FSB added together the 2 quarters Solo submissions, they would
get correct figures for the half-year. However correcting such an error, if
significant, would lead to the trend in revenue account items / movements looking
stranger. This issue does not arise with the quarterly reporting done in terms of
the current regulation as insurers all report year to date numbers. Hopefully
insurers will not make errors but, if they do, it would assist both the FSB and the
insurer if there was clarity about the preferred way to rectify such errors.
Any corrections made to previous quarter figures need to be included in the current quarter figures.
Thus, the opening balance at the start of the current quarter should not be changed and should thus
correspond with the closing balance in the previous quarter submission (which contained the errors).
Any corrections should then be included in the current quarter figures so that the closing balance at
the end of the current quarter includes the corrections made to previous quarter figures plus the
current quarter figures. If it is felt that the correction is material and that it should be highlighted to
the FSB, the comments section at the bottom of the sheet can be used to add a clarification.
I am trying to classify an Additional Unexpired Risk Reserve under Technical
Provisions, in accordance with SAM. As what type of provision should we classify
an AURR? Premium Provision?
7.
8.
Solo
Solo / Group
TP1S
N/A
N/A
N/A
It will form part of the Premium Provision. An AURR is held in addition to the UPP if you feel that the
UPP would not be enough to cover claims and costs for the unexpired period of risk. Under SAM the
Premium Reserve is calculated as the expected present value of future income and outgo for the
unexpired period of risk. Thus, it will capture the AURR.
The light parallel run templates are all in Excel. Is the FSB expecting the Excel
spreadsheets to be submitted or are insurers expected to print these out in order to
get the required signatures? The format of some schedules makes printing them
out difficult as the information is too wide to fit on a single page.
The FSB is expecting that the spreadsheet be submitted in electronic form. Only the “Signoff” tab
should be printed, scanned and submitted in pdf form.
9.
Solo / Group
N/A
N/A
Will the person who completes the Light Parallel Run spreadsheets (where that is
not the public officer) be able to upload the light parallel run submission
templates?
For the light parallel run, we will enable up to 3 people from each insurer to register to be able to
upload the submission templates. All requests to register additional people to upload documents for
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Ref. #
Solo / Group
Tab
Reference
Question / Answer
the light parallel run must be done by the public officer and must be sent to the SAM Light Parallel
Run Inbox - SAM.LightPR@FSB.co.za.
Reference is made to regulated entities.
10.
Group
N/A
N/A
Is this referring to all regulated entities? And does it mean that these are
automatically in scope e.g. those falling under FAIS only etc. OR does it refer to
only licenced entities being regulated entities?
Regulated entities will include all entities inside and outside SA that is regulated by legislation. For
example if you refer to the FSB Act it states the different financial institutions that are regulated. It
will therefore be all the financial institutions that are supervised locally or internationally.
11.
Group
N/A
N/A
Per G1.4.2 of the guidance for group template “(b) Participations included in a
group are those in which the group has between 20% and 50% economic interest,
thereby providing significant influence. If the holding is less than 20% the investor
will be presumed not to have significant influence unless such influence can be
clearly demonstrated. All participations are included in the scope of the group.”,
does this imply that an entity which is between 20% and 50% held is automatically
in scope, or are these included based on assessment considering all other factors?
Participations between 20% - 50% shareholding should be assessed in terms of materiality and
included where adhere to the materiality definitions in G.1.4.9 of the Technical Specs.
Period for which Group submission income statement information should relate
Point 2 of the Group Submission covering letter indicates that the reporting should
be for the “half-year or financial year end”.
The introduction to the Group templates point 7 indicates: Make sure that, where
relevant, the figures in this submission tie in to the figures submitted in the Solo
Quantitative Quarterly submission(s).
12.
Group
N/A
N/A
Please confirm that the FSB still intends for insurers to reflect “Attributable
earnings after tax” in the “Group Solvency” tab for the full half-year (for their
submission half way through their financial year) and for a full year (for their
submission at the end of their financial year). This will mean that the FSB will not
be able to compare the earnings numbers in the Group submission to the numbers
in the Solo submissions (as insurers are required to only include the revenue for
the last 3 months in their Solo submissions).
“Attributable earnings” would be on the last full year, even for the half yearly reporting. This figure is
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Ref. #
Solo / Group
Tab
Reference
Question / Answer
only used to understand the importance of the entity, and is in no way used to calculate the group
solvency position.
Can you please assist me regarding the submission dates for the light parallel run?
There seems to be some confusion regarding when the return has to be submitted.
Our year end is March. According to us we need to submit our light parallel run the
end of November 2014 based on the September 2014 quarter figures.
13.
Solo
N/A
N/A
The light parallel run consists of two quarterly templates that will need to be submitted.
As per the technical specifications and the SAM 2014 Update, for an insurer with a March year end
we will expect the following quarterly templates to be submitted:
• June 2014 submitted by 31 August 2014
• September 2014 submitted by 30 November 2014
For purposes of this return, do we follow the same methodology around disallowed
assets as per the current quarterly.
An example is the 7.5% on debtors, do we continue to disallow this.
14.
Solo
N/A
N/A
The approach followed in the QIS3 submission should apply to the LPR templates. Thus, please
refer to the LPR technical specifications on page 7 where it refers to the SA QIS3 spec with some
general and specific changes. In particular, you may reference the “Valuations” and “Own Funds”
sections in the SA QIS3 specification. The disallowed assets in the current calculations are replaced
by deductions and tiering in the own funds.
I’ve started to work on the return for the light parallel run and it seems that there is
a formula / input date missing for the opening balances on sheet OF4.3S.
15.
Solo
OF4.3S
Rows 15, 32,
41, 50, 59 and
76
The closing balances take (rightly) into account the opening balances. However, we
are unable to add the opening balances in the rows referring to the opening
balances (e.g. row 15 below). Row 15 does also not include any reference to the
balances in the other sheets.
Are you going to issue a new version of the Solo return?
The opening balances for the technical provisions will be an input for the second quarterly
submission onwards. However, for the first submission of the LPR templates, it was decided that
insurers do not need to calculate the opening balance of the technical provisions (This would have
meant that insurers need to calculate the technical provisions for the previous quarter on a SAM
basis as well to get the opening balances for the first LPR submission). Thus, from the second
submission onwards, insurers will have the opening balances of the technical provisions calculated
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Ref. #
Solo / Group
Tab
Reference
Question / Answer
on a SAM basis (i.e. the closing balance calculated as per the previous quarter return) which then
need to be reported.
16.
Solo
OF4
N/A
Please confirm that for OF4 reporting purposes insurers are expected to include
cash inflows on investment contracts as premiums and cash outflows on
investment contracts as claims. This would apply to gross investment contract
amounts as well as any reinsurance amounts on the investment contracts. This
would be consistent with the treatment in the current quarterly and annual returns.
This will mean that investment contract premiums and investment contract claims
will show as differences in any reconciliation done to the “insurance premiums” or
“claims and policyholder benefit under insurance contracts” amounts shown in the
IFRS annual financial statements.
Confirmed.
There are several investments which meet more than one of the asset classification
definitions. As an example:
If one has an investment in a mutual fund that consists of only equity investments
within one country, is this fund classified as:
17.
Solo
D1 - Assets
N/A
a.
An equity fund, or
b.
An asset allocation fund.
Which one does one select if the mutual fund matches both definitions?
The CIC table is included as part of the set of log files for the LPR template. This table includes the
various CIC categories with definitions. Insurers need to use this table to classify assets into the
most appropriate categories for reporting purposes. The insurer needs to decide where to classify a
certain asset in cases where there seems to be an overlap.
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