Solvency II regulatory reporting

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Subtitle for event – (Arial 28pt)

Giles Fairhead

Head of Department, Retail Life

Date (Arial 16pt)

Life Insurance Division

Agenda

1. Solvency II reporting and submissions timetable 2.

The PRA’s expectations in the preparatory phase 3.

The PRA’s data collection system, firm testing and on-boarding plan 4. Asset data reporting expectations 5.

Current ‘hot topics’ from industry engagement 2

Reporting and disclosure is integral to Solvency II

Three-pillar approach Pillar 1 Quantitative requirements

• Own Funds (including balance sheet) • Minimum capital requirement (MCR) • Solvency Capital Requirement (SCR)

Pillar 2 Qualitative requirements and supervisory review

• Governance, risk management and required functions solvency assessment

Pillar 3 Reporting, disclosure and market discipline

• Supervisory Process • Disclosure • Transparency

Pillar 3

supervision through market mechanisms • Market-consistent valuation of balance sheet • Risk Based requirements • Business governance • Risk-based supervision • Disclosure • Transparent markets 3

The Solvency II reporting requirements include qualitative and quantitative reports

• • The Solvency II regime will place new reporting requirements on firms covering both quantitative and qualitative aspects The Solvency and Financial Condition Report (SFCR) and the Report to Supervisors (RSR) contain both qualitative and quantitative reports

Sections covered

• • • • • • • • •

Quantitative reporting templates

Balance Sheet Premium claims and expenses Own funds Variation analysis SCR and MCR Assets Technical provisions Reinsurance Group reporting • • • • •

Narrative reports

Business and performance System of governance Risk profile Valuation for solvency purposes Capital management 4

Pillar 3 will require firms and groups to make certain reports and templates publically available

• • • The Pillar 3 reporting requirements under Solvency II focus on two main reports, the Solvency and Financial Condition Report (SFCR) and the Regular Supervision Report (RSR) A limited number of quantitative templates and qualitative data are required to be made publically available in the SFCR All quantitative templates and a detailed set of qualitative data is required to be reported privately to the regulator in the RSR

Audience Public Private

Narrative Reports Quantitative Reporting Templates National Specific Templates Other Type Frequency Type Frequency Frequency Qualitative Annual Quantitative Annual N/A Major developments affecting relevance of SFCR will require an updated SFCR Qualitative • Annual summary • In full every 3 years Quantitative Annual & Quarterly Annually PRA ad-hoc reporting will continue 5

Solvency II reporting policy timetable

2014 2015 SII Directive

31 March 2015

SII Transposition Guidelines

Jun – Sep 2014

Guidelines 1 Public Consultation

February 2015

Guidelines 1 Publication

Dec 2014 – Mar 2015

Guidelines 2 Public Consultation

October 2014

ITS 1 Publication Implementing Technical Standards Taxonomy

Dec 2014 –Mar 2015

ITS 2 Public Consultation

July 2014

Final taxonomy for preparatory phase

December 2014

Draft SII taxonomy

April 2015 July 2015

Guidelines 2 Publication

June 2015

ITS 2 Publication

July 2015

Final SII taxonomy Candidate Final SII taxonomy 2016

1 January 2016

SII Implementation 6

The PRA is seeking industry feedback on a range of topics

The PRA will continue to publish consultation papers on Solvency II to gain industry feedback. Supervisory statements will be published ahead of transposition at 31 March 2015 • The PRA proposed 11 NST templates issued as part of CP16/14.

• Remaining NST templates are expected to be issued for consultation before the end of the year.

• The PRA expects to issue further information, as required, on materiality levels, exemptions and the application of proportionality later this year or early 2015. Number NS.01

NS.02

NS.03

NS.04

NS.05

NS.06

NS.07

NS.08

NS.09

NS.10

NS.11

Template Name With-profits value of bonus With-profits assets and liabilities Pools Assessable mutuals Revenue account (Life) Business model analysis (Life) Business model analysis (Non-Life) Business model analysis – financial guarantee insurers Best-estimate assumptions for life insurance risks Projection of future cash flows (best estimate – non-life: sub-classes) Non-life insurance claims information (general liability sub-classes) 7

Current timetable for submission of returns for firms and groups with 31 December year end

Firms with non-December year end should speak to supervisors for their submission timetable 2015 2016 2017 Solvency I Submissions Solvency II Submissions Solos Groups

March 2016

Last Solvency I submission

Preparatory phase returns

Cat 1-3 firms only

Day 1 SII returns returns

All directive firms and groups

1 Jul Annual 25 Nov Qrtly 15 Jul Annual 6 Jan 2016 Qrtly 20 May One off 26 May 25 Aug 20 May One off Q1 7 Jul Q1 Q2 25 Nov Q3 6 Oct Q2 6 Jan Q3 25 Feb 19 May Q4 Annual + NST 7 Apr Q4 30 Jun Annual NB: Details dependent on final text.

NB: Please be aware that the date of Day 1 returns was changed to 20 May 2016 for both solos and groups in the Delegated Act. This change was made on the table above after the PRA Solvency II Conference on 17 October 2014 .

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The PRA’s expectations of firms participating in the preparatory phase

Expectations of firms were set in December 2013 when the PRA published Supervisory Statement 4/13 on applying EIOPA’s preparatory guidelines Category 1-3 firms and groups required to report. All firms and groups in scope of preparatory reporting should have been notified in January 2014

A significant increase in the extent and depth of insurance data shared between firms and the PRA

The preparatory phase should be used by firms to prepare for Solvency II implementation and returns should be of a high standard and quality Firms and groups will need to be on-boarded onto the BoE PRA Data Collection system in Q1/2 2015. Training will also be made available All quantitative firm returns are expected to be in XBRL format with qualitative returns in PDF NSTs not expected for interim reporting 9

Firms will submit returns via a new reporting system

• The PRA will use a new system to support data collection and XBRL processing, which firms will be able to access via a web portal • All returns must be provided in the following formats: • QRTs – in XBRL • Qualitative returns – in PDF • NSTs – in Excel (initially, may move to XBRL in the future) Firm submits QRTs NSTs Qualitative returns • Feedback provided to firms on validation and plausibility • Re-submissions may be required or further explanation requested

Collections system

Secure Web Portal XBRL processor Validation Plausibility EIOPA PRA Supervision 10

The PRA will be conducting industry testing and on boarding firms throughout 2015

2015 2014 Q4 PRA XBRL testing Q1 Q2 Industry testing (Cat 1-3) Q3 Q4 Industry testing (all other firms) 2016 Q1 On-boarding (Cat 1-3) On-boarding (all other firms) • The PRA intends to implement and start testing the data collection system and the XBRL processor in Q4 2014 • Data collection system testing with firms is planned in two stages;

1.

2.

Industry testing for Cat 1-3 firms

– Cat 1-3 firms will be expected to test the PRA external web portal prior to June 2015 including logging in, setting up their return and submitting test data

Industry testing for non Cat 1-3 firms

– from Q3 2015 all other firms will be provided the opportunity to also test the Portal, to trial logging in, setting up returns and uploading files • Firms will be expected to on-board, with those participating in the preparatory phase prioritised 11

Solvency II reporting increases the amount of detailed information reported

Solvency II returns will require the submission of detailed asset data for the first time. As a result, the volume of data submitted is expected to significantly increase. This will include line by line asset data which must include a range of detailed information about the asset including items such as NACE codes and geography. Given this increase in granularity the PRA expects firms to need to have: • • Early engagement with the organisations who manage their assets to prepare for the requirements that will be placed upon them as a result of the asset data submissions Early engagement with other stakeholders (e.g. IT providers, information providers) The PRA would expect cat 1-3 firms to be well advanced in this regard as some of this granular information will be required in the preparatory reporting.

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Current ‘hot topics’ from the industry engagement

• • The PRA Solvency II regulatory reporting industry working group acts as a forum for the PRA and industry representatives to discuss technical and practical implementation challenges.

Three key areas where firms are seeking further clarity have been highlighted.

Asset Look through Audit and assurance of regulatory returns Materiality threshold

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Addressing firm questions

If firms have questions regarding Solvency II regulatory reporting requirements and interpretation, they should : 1. Check the published PRA Q&As on the BoE PRA website http://www.bankofengland.co.uk/pra/Pages/solvency2/preparing.aspx

2. Submit questions to EIOPA’s question and answer process if the questions have not already been answered https://eiopa.europa.eu/publications/eiopa-guidelines/qa-on guidelines/index.html

3. Help the PRA track questions submitted to EIOPA by notifying [email protected]

The PRA will continue to publish answers to questions received from firms in the run up to implementation 14

Key messages – regulatory reporting

• The PRA is building a new data collection system and will be ready to receive the submission of information in the preparatory phase from June 2015 • The PRA is consulting on NSTs in CP16/14, final templates will be published in a policy statement ahead of transposition. Further consultation papers will be published on reporting including Lloyd’s NST and firm exemptions from Solvency II reporting • Reporting policy is increasingly stable, there are some outstanding issues that the PRA is aware of through its work with the regulatory reporting industry working group • Testing of the new system is expected to start in Q1 2015 and will be phased in the run up to implementation. Firms will be expected to on-board to the system from Q2 2015. Cat 1-3 firms participating in the preparatory phase will be prioritised for both testing and on-boarding

Next steps for firms

Firms with a 31 December year end should be aware of when they will be involved in PRA testing, on-boarding and when they need to submit their first returns

Testing On-boarding

• • •

Cat 1-3 firms

February 2015 for selected subset of firms. (participating firms have already been notified) Q2 2015 for all other Cat 1-3 firms •

All other firms

Starting Q3 2015 Starting Q1 2015 • Starting Q4 2015

First preparatory phase returns First Solvency II returns due

• • • •

Solos

- 1 July 2015 , Annual submission

Groups

- 15 July 2015, Annual submission

Solos

– 20 May 2016, Day 1 submission

Groups

– 20 May 2016, Day 1 submission • No reports due during preparatory phase • •

Solos

– 20 May 2016 , Day 1 submission

Groups

– 20 May 2016, Day 1 submission NB: Please be aware that the date of Day 1 returns was changed to 20 May 2016 for both solos and groups in the Delegated Act. This change was made on the table above after the PRA Solvency II Conference on 17 October 2014 .

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