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

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!

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

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)

General framework Implementing technical standards EIOPA guidelines 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

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 !

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!

Structure of narrative reporting & disclosure Similar structure of narrative RSR and SFCR to enable comparability between undertakings & between the SFCR / RSR SFCR and RSR a. Business, External Environment and performance B. Governance and remuneration policy C. Risk Profile D. Valuation for solvency purposes E. Capital management

Content of narrative reporting & disclosure SFCR RSR A. Business, Environment and Performance Underwriting performance (by material LoB & area); Investment performance (Performance is based on statutory accounts) 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 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

Structure of quantitative reporting templates ( “QRT”) Balance sheet Assets (incl. detailed list) Technical provisions (Life & Non-Life) Reinsurance Capital requirements (SCR / MCR) & Own funds Variation analysis Harmonised elements + National specificities Specific regulations or activities: e.g. distribution of profits, P&I clubs, etc.; Accounting information 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

(when there is sub group supervision!) Scope of QRT General scope of group templates Solo Templates (EEA (re)insurance entities) Group-specific Templates (non-EEA or non-insurance entities, IGT, risk concentration) Group Templates Also for sub groups (when there is sub group supervision!)

Submission and disclosure of QRT 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

Reporting 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 possible Art. 102 (1): recalculation of SCR if major deviation in risk profile & immediate reporting to supervisor Undertakings 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 plan Non-compliance with SCR : within 2 months if no realistic recovery plan, or after 6 months if non-compliance not resolved in spite of realistic plan Undertakings should update their SFCR in case of major developments (Art. 54 SII Directive), and at least when:

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

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 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.

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?

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?

Thank you!