Tag Archives: Pillar 3

Annual QRTs: Getting it right first time, every time

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

Over the next few weeks, companies will be finalising their first sets of annual Quantitative Reporting Templates (QRTs) to be submitted under Solvency II. For companies with a financial year-end of 31 December, the reporting deadline is 20 May 2017.

A key part of preparing the annual (or quarterly) QRTs is ensuring the accuracy of the information provided. In this blog post, we highlight some validation processes available to companies.

In recent speaking engagements and publications, the Central Bank of Ireland (CBI) has underlined the importance of ensuring that the supervisory returns are validated and that there is appropriate governance in place so that the directors, who sign off on the annual QRTs, are satisfied that the returns are accurate and complete. In its recent Insurance Quarterly bulletin, the CBI stated that its ‘experience to date has shown that successfully meeting the dual requirements of “fit for purpose” and “right first time” requires firms to manage much better the governance and operational risks around the reporting process.’

Pressure to put in place a validation and governance process also comes from the board as the annual QRTs must be approved at a board level under the Solvency II text. In addition, in Ireland three named directors are required to submit an accuracy certificate on the annual QRTs. The CBI points out that ‘while those signing off returns may not be the people reviewing them, they should ensure that they have a clear process that they can rely on.’

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SFCR: Some more reports published

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

Two new Solvency and Financial Condition Reports (SFCRs) were published in the past week. In both cases, the financial reporting date is 31 December 2016, representing an impressive turnaround time for public disclosure. They are both useful examples of Group SFCRs:

• St. James’s Place Group prepared a single SFCR encompassing the public disclosures for the Group and all of the solo entities within the Group with two life company subsidiaries.
• ASR understood it is a Group SFCR and so each of the solo entities has prepared separate SFCRs. ASR has published the public Quantitative Reporting Templates (QRTs) in a separate document which is available on the same web page as the SFCR report.

Company Link Country Reporting Date
St James’s Place Group Link UK 31/12/2016
ASR Group Link

Link

Netherlands 31/12/2016

Taking the temperature on Solvency II Pillar 3: A Milliman client survey

The early months of 2016 were busy ones for Solvency II reporting, so the summer allowed the industry to finally come up for air. Following the submission of the first Solvency II reporting (Day 1 and first quarter 2016 templates) in May 2016, we took the opportunity to conduct a survey across the Irish insurance industry on Pillar 3 reporting. Thirty-seven companies took part, representing a broad cross-section of insurers in both the domestic and cross-border markets. It had a heavy focus on companies writing life business.

The survey looks at the experience of companies to date, the key challenges faced by (re)insurers, and the level of work required to meet the first annual reporting requirements in May 2017.

Experience to date: Ireland
Perhaps not surprisingly, the two templates that caused the most difficulty for companies in the survey were S.06.02 (detailed list of assets) and S.06.03 (asset look-through).

All companies were required to complete template S.06.02 based on their asset holdings at the end of the first quarter 2016. This template requires detailed information on each asset held and proved to be one of the most challenging and time-consuming aspects of the quarterly templates. The silver lining for companies is that we would expect the workload required to complete S.06.02 to lessen once processes and procedures have been bedded down.

The asset look-through template (S.06.03) is one of the more contentious and challenging aspects of the Solvency II reporting requirements. Only companies with a high or medium-high rating under the PRISM impact rating system of the Central Bank of Ireland (CBI) are required to prepare the look-through template for quarterly reporting during 2016. Companies with low or medium-low PRISM rating will have to prepare the look-through template for the first time in respect of 31 December 2016.

Looking ahead, 46% of survey respondents stated that they do not expect to fully meet the look-through requirements at year-end 2016 (56% among unit-linked companies). That is, companies do not expect to be in a position to provide a 100% look-through of all collective investment funds.

Love it or hate it, the asset look-through template is likely to keep many financial reporting teams busy in the coming months. The CBI has engaged directly with PRISM impact companies rated high and medium-high, and has set out its expectations regarding future reporting periods.

Looking ahead to annual reporting
While the first reporting deadlines in May 2016 represented a significant milestone, annual reporting in respect of year-end 2016 will be an even bigger hurdle for many companies. In May 2017, companies will be required to submit the first set of annual Quantitative Reporting Templates (QRTs), in addition to the first set of narrative reports—the public Solvency and Financial Condition Report (SFCR) and the Regulatory Supervisory Report (RSR). The first quarter 2017 reporting deadline also falls in May next year, so plenty of coffee and midnight oil may be required.

For the annual QRTs, companies identified the asset templates (including the asset look-through) and the reinsurance templates as the areas requiring most work.

The workload involved in preparing the SFCR and RSR reports for the first time should not be underestimated. Approximately 50% of respondents have not yet started drafting the SFCR and RSR. We received a very wide range of estimates for the length of these reports.

Elsewhere in the Pillar 3 world
Looking ahead to the first submission of annual templates, the CBI recently announced that it will host a test cycle for the annual Solvency II and annual NST returns from 5 to 21 December. Depending on your viewpoint, this represents an early Christmas present or a death knell to your festive season.

Where possible, companies should be looking to conduct a dry run of the annual templates in advance of a busy year-end period next year. This test phase presents a timely opportunity for companies to complete their dry runs.

Furthermore, the CBI recently consulted on the proposed external audit of the SFCR and associated annual QRTs with the aim of determining its final policy position by the end of September 2016. The final audit requirements will go to press shortly, and companies will need to allow for external audit as part of their 2017 plans also.

To read more about the Milliman Solvency II Pillar 3 Survey, please see our briefing note here.