5 a. Business, External Environment and performance Narrative SFCR & RSR => similar structure, with 5 parts, to enable comparability between SFCR and RSRB. System of governanceC. RISK ProfileSfcr &rsra. Business, External Environment and performanceD. Valuation forsolvency purposesE. Capitalmanagement
6 Contents of SFCR and RSR A) Business, External Environment and performanceB) System of GovernanceC) Risk profileBusiness and external environmentUnderwriting PerformanceInvestment PerformancePerformance from other activitiesGovernance ArrangementsFit and ProperRisk Management & ORSAInternal ControlInternal AuditActuarialOutsourcingAny other disclosuresFollowing risksUnderwriting RiskMarketCreditLiquidityOperationalOther material Risk Exposures
7 Contents of SFCR and RSR D) Valuation for Solvency PurposesE) Capital ManagementAssetsTechnical ProvisionsOther LiabilitiesOther DisclosuresOwn Funds - Structure, Amount & QualityMCR and SCRUse of duration based equity risk sub-moduleSCR differences if standard formula or internal model usedNon-compliance with SCR/MCR
8 Narrative Reporting & Disclosure Specific information requirements for undertakings / groups using internal modelsGroups – option to prepare a single group-wide SFCR (with agreement of supervisor). Must prepare group RSR and solo RSRNarrative SFCR & RSR => additional group-specific information:Group SFCR :legal & organisational group structureintra-group outsourcing arrangementsdescription of restrictions to fungibility & transferability of own fundsGroup RSR :contribution of each subsidiary to the group strategy
10 QRTs – current statusCP 58 (mid-2009) – preliminary draft of QRTs includedInformal consultation carried out from April to September 2010“Pre-consultation” phase – from January to March EIOPA currently considering responsesPublic consultation phase – Autumn 2011?
11 Quantitative Reporting Templates Number46 templates for solo entitiesMost solo templates are also applicable to groups15 group specific templates.Submission of templates :Annual for all templates and all undertakingsQuarterly for “core” solo templates, with simplified presentation & possible exemption in certain casesQuarterly or half-yearly for “core” group templates ?Public disclosure of templates :Public disclosure of some annual templates, within the SFCRPossibility of simplified presentation
12 Quantitative Reporting Templates - Solo Balance sheetAssets (incl. detailed list)Technical provisions(Life & Non-Life)ReinsuranceCapital requirements (SCR / MCR) & Own fundsVariation analysisHarmonised elements+National specificitiesSpecific regulations or activitiesReceived in a harmonised format, capable of being shared automatically with EIOPA and/or other supervisory authoritiesReceived in locally-defined format and not automatically shared
13 Balance Sheet (3 forms)Balance Sheet – based on Solvency II valuation rulesOff-balance sheet items – representing risks not captured by the balance sheetAssets and liabilities by currency – to assess potential currency mismatches
14 Assets (7 forms) Detailed list of investments Structured products DerivativesReturn on investmentsInvestment funds (look through)Securities lending and reposAssets held as collateral
15 Technical Provisions (15 forms) Separate templates for life (7) and non-life (8) businessGive an overview of TP by line of business (LoB) for both life and non-life – split by best estimate and risk margin (with additional segmentation)Also include information, amongst others, on:development triangles for non-life (and premium and expense information)movement in non-life claims provisionsprojection of future cash flows for life and non-lifeVariable annuities – guarantees by product and hedging of guaranteeslarge risks underwritten for both life and non-life
16 Reinsurance (4 forms) Templates cover: the reinsurance programme; and the exposure to reinsurers.Specific template for SPVs
17 Capital requirements (12 forms) Templates provide the main outputs of the SCR and MCR calculationsFor undertakings using the standard formula, outputs are further detailed by module (market risk, counterparty risk etc.).Freedom of format for SCR reporting by risk categories for undertakings using an internal model (to be determined with supervisor).
18 Own Funds (2 forms)Templates give a detailed view of own funds by instrument and tierAdditional elements for certain specific instruments such as ancillary own funds or subordinated liabilities
19 Variation Analysis & miscellaneous (3 forms) Variation Analysis template analyse changes in own funds from one reporting period to another (since no Income Statement in Solvency II templates)Miscellaneous forms cover:Activity by country under Freedom to Provide Services / Branch : information requested under art. 159 of L1Premiums, claims & expenses
20 Group specific templates (15 forms) Aim is to cover group specific issues that cannot be directly covered by the solo templatesDifferent categories of group templates, including:Description of scope of group for supervisory purposesGroup specific issues – group own funds etc.Reporting of intergroup transactions and risk concentrations
21 QRTs are very detailed but…… Reporting burden is often due not to reporting itself, but to new requirements of Solvency II, e.g.:New segmentation by LoBCash flow approach for BEEconomic valuation of BS itemsLess information in templates means :More ad hoc requestsMore national specificities
23 Process of Reporting – Frequency & Deadlines SFCRRSRQuantitative FormsFrequencyAnnual1) “Full” report at least every 3 years or when required by Supervisors2) Material Updates AnnuallyQuarterly and AnnualSubmission Date - Solo*14** weeks after year end14**weeks after year endQuarterly 5** weeks after end.Annual 14** weeks after year end* Group templates – as per the solo reporting period extended by 6 weeks** Until 2015 there is a limited extension for both annual and quarterly submissions
24 Process of Reporting – Frequency & Deadlines SFCRRSRQuantitative FormsFormatCommon Template as developed by EIOPASign off -internal – administrative or management bodyYesSign off – external auditing or verificationNoTo be determined
25 Reporting required on other occasions? 12 April 2017Reporting required on other occasions?“Day 1 reporting”S2 balance sheet and SCR at 1 January 2013 is proposed – submission date?Predefined eventsReport any information necessary for the purpose of supervision after the occurrence of any event that could effect protection of policyholdersInclude any event that can lead to material changes to an undertaking’s risk profileMay require supervisory authorities to reassess the frequency and intensity of supervisory actions.Supervisory EnquiriesSupervisors may request any information required to assess the situation of an undertakingA common misconception
27 Reporting & Disclosure Policy Obligation for undertakings to have written Reporting & Disclosure policies, approved by administrative, management or supervisory body (AMSB)Possibility for undertakings not to disclose confidential information in SFCR, upon permission of supervisorPossibility for undertakings to disclose additional informationApproval of SFCR by AMSB (L1) and of RSR (L3)
29 Open issues Outcome of ORSA reported separately from RSR? External audit of templates?National specificities?Use of proxies for quarterly templates?Simplified format for public disclosure?
30 ConclusionReporting and Disclosure provisions of Solvency II represent a significant change to the existing frameworkConcerns all supervisors and companies across EuropeRequires significant preparation and adaptation