Category Archives: Solvency II

Analysis of Dutch insurers’ Solvency and Financial Condition Reports

In May 2017, the first Solvency and Financial Condition Reports (SFCRs) were published for year-end 2016. This report by Milliman consultants provides a summary of key solvency information related to various life and non-life insurance entities in the Netherlands based on their SFCRs. The report also focuses on the largest consolidated insurance groups.

Brief study of UK health insurers’ first SFCRs

Solvency and Financial Condition Reports (SFCRs) contain a number of Quantitative Reporting Templates (QRTs). They are an important source of information on a company’s financial position under Solvency II. This report by Milliman’s Joanne Buckle and Didier Serre compares and contrasts the information in selected QRTs of 13 health insurers in the United Kingdom.

Analysis of Luxembourg insurers’ Solvency and Financial Condition Reports: Year-end 2016

This report by Milliman consultants summarises the Solvency and Financial Condition Reports of the main players in the life and non-life insurance business in Luxembourg. It focusses on the largest insurance entities in Luxembourg as well as some large reinsurance entities and includes an overview of the factors determining the Solvency Capital Requirement ratio.

EIOPA provides feedback on SFCRs

This blog is part of the Pillar 3 Reporting series. For more blogs in this series click here.

The European Insurance and Occupational Pensions Authority (EIOPA) has recently provided feedback to the industry on the first batch of published Solvency and Financial Condition Reports (SFCRs). The findings are based on observations from a sample of the 2016 group SFCRs and also from similar reviews of solo SFCRs by various national supervisors.

In order to support the industry in preparing future SFCRs, EIOPA has published a Supervisory Statement with its findings. It should be noted, however, that the findings are nonbinding on companies. Nonetheless it is reasonable to expect that supervisors might expect the industry to at least consider these findings when drafting their next reports.

This blog post outlines some of the highlights from the supervisor’s feedback:

• Where a reporting item is not applicable, it is important to have a clear indication that the information is not applicable. Examples would include pointing out that an internal model, the matching adjustment or the volatility adjustment are not applicable for a given company.

• Companies should take care in setting the content and language styles of the reports, particularly the Summary section. Policyholders should be the main addressees of the Summary, and EIOPA has outlined the minimum content it expects to see in this section of the report. The remaining sections can be addressed to analysts and investors, so it is not expected that legislative definitions or detailed requirements need to be explained in the main body of the SFCR.

• While it is good practice to include Quantitative Reporting Templates (QRTs) in the Appendix to the SFCR, it should not prevent companies from including quantitative information in the body of the report. If appropriate, parts of the QRTs should be repeated or complemented by the narrative information in the SFCR.

• It is expected that the sensitivity to different scenarios or stresses is disclosed in a structured format. Within the chapter on Risk Profile, information on the overall impact should be provided under each risk section.

• EIOPA would like to see more undertaking-specific information regarding valuation of investments, valuation of deferred tax assets and liabilities and valuation of technical provisions.

• Within the section on Valuation of Technical Provisions, the SFCR should provide a description of the level of uncertainty in the calculations. The degree of uncertainty should be at least linked to the assumptions underlying the calculation, such as economic and noneconomic assumptions, future management actions and future policyholder behaviour.

• Undertakings should also include comparative information against the previous year’s submission in certain areas of their 2017 SFCRs. EIOPA recommends that companies provide comparative information in table format as much as possible. Qualitative information on material differences between two reporting years is also expected to be included in the report.

Companies should, where possible, bear this feedback in mind when preparing their next SFCRs.

RSR feedback from Central Bank of Ireland

This blog is part of the Pillar 3 Reporting series. For more blogs in this series click here.

The Central Bank of IreIand (CBI) recently completed a review of 2016 Regular Supervisory Reports (RSRs) and has now written to companies with its feedback. To recap, the RSR is a private report submitted to the supervisor, and the Solvency and Financial Condition Report (SFCR) is the publicly disclosed equivalent of this report.

The CBI’s review focussed on the following:

• Confirming that each of the headings and subheadings required by the regulations were addressed in the reports
• Assessing the completeness and quality of responses under each of the main headings
• Checking that the details provided were in line with the CBI’s understanding of the firm

The letter sent to each company detailing the supervisor’s feedback can be found at the CBI’s website here. A key point highlighted is the requirement that the RSR be forward-looking, focussing on the business planning horizon. Companies should include detailed analyses of the risks facing their businesses over this period.

Companies should bear this feedback in mind when preparing their next RSRs, where possible.

RSR reporting frequency
Under Solvency II regulations, companies must prepare a full RSR at least every three years. However, the frequency of the RSR is at the discretion of the local supervisor, which can request more frequent reporting. Based on this review, the CBI is happy that a three-year cycle is appropriate. However, it will look to spread reporting across the three-year period by requesting some companies to report an RSR in 2018 and some in 2019. Therefore the CBI has outlined in the letter when it expects firms to submit their next RSRs.

For companies not required to submit a full RSR in a given year, they should instead provide summaries of material changes. The summary must detail any material changes that have occurred over the reporting period relating to topics covered in the RSR and provide a concise explanation about the causes and effects of such changes.

Analysis of Belgian insurers’ Solvency and Financial Condition Reports: Year-end 2016

In May 2017, the first Solvency and Financial Condition Reports (SFCRs) were published for year-end 2016. The SFCRs contain a significant amount of information, including details of the company’s performance over the reporting period, systems of governance, risk profile, valuation basis and capital requirements. This report by Milliman consultants is a summary of the SFCRs for the main players in the life, non-life and health insurance business in Belgium, focussing on a subset of insurers in the Belgian market.