Yesterday, EIOPA released for consultation the second wave of both technical standards (which will be binding on both insurers and supervisors) and guidelines related to Solvency II. National competent authorities (NCA) must make every effort to comply with the guidelines, so insurers need to also assume that these will apply. The package of papers comprises 10 technical standard papers (equity dampener to follow) and 8 guideline papers containing nearly 180 individual guidelines.
Peter Ott, Head of Solvency II at KPMG, commented: “We welcome the publication of these papers early in December, which will allow some time for insurers to begin considering these requirements ahead of the holiday season. However, the volume of papers is significant, especially on the reporting requirements, and it is going to take a significant amount of time to review these and assess what changes may be required to companies’ existing Solvency II implementation work.”
Janine Hawes, insurance director at KPMG, added: “One aspect that will be particularly important for insurers to consider is the day 1 reporting package, which is required within 20 weeks. This is the first time we have seen the proposed templates, which cover the key elements to determine the opening solo and group solvency positions (own funds, minimum and solvency capital requirements, balance sheet and basic information). The opening balance sheet template includes a line by line comparison with existing regulatory valuations, which goes beyond the draft delegated acts, which requires this only for material classes of assets and liabilities. The Insurance Groups Directive does not include reporting of the group regulatory balance sheet, so this may need to be built into firms’ year-end reporting processes.
“A further reporting challenge will be the submission of quarterly information for financial stability purposes. These requirements will apply to both solo insurers and groups representing over 50% of the national market or individually having total assets in excess of 12 billion euro. The deadline for submission is significantly shorter than Solvency II’s group reporting deadlines, at just 9 weeks in year one compared with 14 weeks for the group templates, requiring a significant acceleration of data from group companies. Affected entities will also need to establish processes for meeting these deadlines and determining a “best estimate” solvency capital requirement on a quarterly basis.”
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