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Solvency II has introduced harmonized reporting requirements for insurers in Europe, both for information to be submitted to supervisors as for public disclosure. These harmonized reporting formats are an important step forward in ensuring a consistent implementation of European regulatory and supervisory frameworks. The Pillar III requirements provide supervisors with the information necessary for effectively supervising insurance undertakings and investors and policyholders with essential information regarding the financial position of insurers. One of the major changes under Solvency II entails the reporting of assets on an item-by-item basis to supervisors, whereas also the public disclosure requirements have been strengthened to ensure more transparency. Finally, not only the content of the reports has changed under Solvency II, but also the way data is submitted to supervisors as XBRL has now been adopted as the standard for data submission. For this purpose, EIOPA has also developed validation rules to ensure that the submitted reports are internally consistent and in line with certain regulatory requirements. Altogether, this presents insurance companies with a substantive change in the way data is reported and disclosed publically.

What are the potential consequences if the submission is not in line with regulatory requirements?

Data quality is of course very important, not only for supervisors but also for insurance companies themselves, as it forms the basis for decision making. In case submissions are not in line with the regulatory requirements, this could first of all lead to a resubmission requirement, where the insurer has to submit a revised report to the supervisor. In case an external audit is required on the submitted information, this may also lead to a re-assessment by the external auditor. However, in case the submissions are structurally not in line with the regulatory requirements this may lead to a fine or in exceptional circumstances even to a capital-add on for significant data quality deficiencies.

Where are the reports lacking accuracy and what level of detail is required?

Based on our experience so far, what we are mainly missing are explanations of the reported figures, such as the main methods and assumptions used in the calculations, the reasons for variations over time, how the insurer has categorized its products across homogeneous risk groups and lines of business and how the risks on the balance sheet have found their way into the SCR calculations. Ideally, the reports should be such that the supervisor does not have try and solve this ‘puzzle’ by himself, but that all calculations and assumptions are immediately clear from the submitted reports.

What would you like to achieve by attending the Pillar III Reporting and Data Quality conference?

I aim to achieve two things by attending the conference: first, providing participants with a supervisory perspective on reporting: what do we look for in the reports, how do we use the information and where would we like to see improvements? Second, I hope to come away from the conference with a good overview of the issues and challenges that insurers are facing with respect to Pillar III and how these can be solved.