Presentation on theme: "Solvency II – Reporting and disclosure"— Presentation transcript:
1Solvency II – Reporting and disclosure Insurance and Reinsurance Stakeholder Group meeting12 December 2011
2Solvency II – Reporting and disclosure Development process of EIOPA guidelines and standards on reporting and disclosureGeneral framework, objectives and meansExplanation on narrative reporting and disclosure, quantitative reporting templates, predefined eventsTowards a formal opinion from the Insurance and Reinsurance Stakeholder Group
3Development 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 feedbackdetailed supporting documents - LOG files and summaries for rationale2009: 1st consultation with CP 58 (for solo templates)Informal consultation from April to September 2010Pre-consultation from January to March 2011Technical meetings with StakeholdersNovember 2011: EIOPA‘sreporting and disclosure package.Macro-prudential reporting needs to follow in December 2011.A stable basis for industry and supervisors to get prepared!
4Development process for standards and guidelines on reporting and disclosure Necessity to stabilise the content of the templatesUndertakings & supervisors need sufficient time, resources, budget planning for preparationOMDII adaptations to scope of the standard should not prevent preparation on stable basis today.Early public consultation by EIOPA on standards and guidelines
5General framework Solvency II Directive contains high-level principles Art 35 => supervisory reportingArt. 51 to 55 => public disclosureArt. 254 § 2 and 256 § 1 => application to groups (mutatis mutandis)Art. 256 => single group-wide SFCR* Omnibus II => scope of Implementing Technical Standards (ITS): templatesDelegated Act provides details on content & structure of narrative disclosure & reporting, frequency & timelinesProcess : CEIOPS Consultation Paper 58 (2009) => Solvency Expert Group discussions between COM and Member States, EIOPA (2010 & 2011) => Almost finalised (publication 2012)
6General framework Implementing technical standards EIOPA guidelines High-priority in OMBII => proposal before Dec 31st 2012Content of quantitative reporting templates under discussionProcess: 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 2011EIOPA guidelinesFurther details on narrative disclosure & reporting, pre-defined events, reporting & disclosure policiesProcess: pre-consultation (Q1 2011) => Public consultation by EIOPA started in Q => Adoption by EIOPA expected in 2012
7Objectives of reporting in Solvency II Regular Supervisory Reporting, the RSRObjectives :Micro-supervision: to perform supervisory reviewMacro-supervision: to give an overall market view (aggregation & comparison of figures and trends)Means:Confidential and more detailed information than for disclosureNo supervision without information !
8Objectives of public disclosure in Solvency II Solvency and Financial Condition Report, the SFCRObjectives :Market discipline: to encourage best practicesMarket confidence: to improve understanding of businessMeans :Transparency on solvency & financial positionExplanation of methods & assumptions usedWider than current disclosure requirements in many countries!
9Structure of narrative reporting & disclosure Similar structure of narrative RSR and SFCR to enable comparability between undertakings & between the SFCR / RSRSFCR and RSRa. Business, External Environment and performanceB. Governance and remuneration policyC. Risk ProfileD. Valuation for solvency purposesE. Capital management
10Content of narrative reporting & disclosure SFCRRSRA. Business, Environment and PerformanceUnderwriting performance (by material LoB & area);Investment performance(Performance is based on statutory accounts)Perceived competition position; Details of performance against projectionsB. GovernanceGovernance structure; Fit & proper requirements; Risk management system (incl. ORSA process); Remuneration policy; Outsourcing policyRemuneration of members of the administrative & management body; Outcome of the ORSA; Overview of internal audits performedC. Risk ProfileExposure on off-balance sheet and SPVs; Summary of risk concentrationDetail of risk mitigation techniques used (reinsurance, SPV, etc.)D. ValuationSolvency II Balance Sheet; Methods and assumptions; Explanation of material differences with statutory accountsE. Capital managementStructure, amount and quality of own funds (by tier); Description of material ancillary own fundsCurrent expectations of SCR/MCR and OF over the business planning horizon
11Structure of quantitative reporting templates ( “QRT”) Balance sheetAssets (incl. detailed list)Technical provisions(Life & Non-Life)ReinsuranceCapital requirements (SCR / MCR) & Own fundsVariation analysisHarmonised elements+National specificitiesSpecific regulations or activities: e.g. distribution of profits, P&I clubs, etc.;Accounting informationReceived in a harmonised format, capable of being shared automatically with EIOPA and/or other supervisory authoritiesReceived in locally-defined format and not automatically shared
12(when there is sub group supervision!) Scope of QRTGeneral scope of group templatesSolo Templates(EEA (re)insurance entities)Group-specificTemplates(non-EEA ornon-insuranceentities, IGT,risk concentration)Group TemplatesAlso for sub groups(when there is sub group supervision!)
13Submission and disclosure of QRT All templates are submitted to the supervisorAnnual for all templates and all undertakingsQuarterly for “core” solo templates, with simplified presentation & possible exemption in certain casesQuarterly for “core” group templatesDisclosurePublic disclosure of some annual templates, within the scope of the SFCRDoes not concern quarterly templatesPossibility of simplified presentation
14Reporting and disclosure upon occurrence of pre-defined events 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 possibleArt. 102 (1): recalculation of SCR if major deviation in risk profile & immediate reporting to supervisorUndertakings should submit information to supervisors upon occurrence of pre-defined events (Art. 35 SII Directive):Non-compliance with MCR: within 1 month if no realistic recovery plan, or after 3 months if non-compliance not resolved in spite of realistic planNon-compliance with SCR : within 2 months if no realistic recovery plan, or after 6 months if non-compliance not resolved in spite of realistic planUndertakings should update their SFCR in case of major developments (Art. 54 SII Directive), and at least when:
15Towards a formal opinion of the IRSG: areas of attention ContentQuarterly 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
16Towards 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 counter-proposal 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.
17Towards 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?
18Towards 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.ImpactQuestion 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?