Mind the Gap – Reporting in a Solvency II World
Carol Lynch, Maaz Mushir, John Kilbride
19th May 2015
1. Overview of Pillar 3 Requirements
2. Pillar 3 challenges
3. Industry preparedness on Pillar 3
4. What insurers need to do
Agenda
Disclaimer:The material, content and views in the following presentation are those of the presenter(s).
Overview of Pillar 3 Requirements
QRTs NSTs SFCR RSR
FrequencyAnnual/
Quarterly*Annual/
Quarterly*Annual
At least once in 3 years
Deadlines for Annual Submission
For Regular Reporting QRTs, 20 weeks for 2016, reducing by 2 weeks every year to 14 weeks atthe end of transitional period. 2 additional weeks allowed during preparatory phase.
Deadlines for Quarterly Submissions
8 weeks for 2016, reducing by 1 week every year to 5 weeks at the end of transitional period.
N/A N/A
Format XBRL XBRLElectronic copy via company website
Electronic copy
Approval by BoardFor Annual templates
only**Yes** Yes Yes
Public DocumentSubset of templates
are publicNo Yes No
* Some Quarterly templates are required for Q2/Q4 only.** Quarterly templates only require management approval.
Regular Reporting Requirements
In addition to this, some insurers will be required to produce Financial Stability Templates.
Overview of Pillar 3 RequirementsSolvency II Calendar
Day 1 QRTs
CBI Returns
Opening Qualitative Information
Quarterly
QRTs/NSTs
Quarterly
QRTs/NSTs
Quarterly
QRTs/NSTs
Quarterly
QRTs/NSTs
ORSA
Annual
QRTs/NSTs
SFCR
RSR
Overview of Pillar 3 RequirementsQuantitative Reporting Requirements
Category
Individual Group
QRTs FSTsPublic
DisclosureQRTs FSTs
Public Disclosure
Day 1 Qrtly Annual Qrtly Annual Annual Day 1 Qrtly Annual Qrtly Annual Annual
General Information 3 2 3 2 2 0 3 2 3 2 2 0Balance Sheet 1 3 9 0 0 3 1 3 7 2 0 3Assets 0 4 9 3 0 0 0 4 9 5 0 0Technical Provisions 0 2 17 0 1 3 0 0 2 0 1 0Technical Provisions (transitional measures)
0 0 5 0 0 1 0 0 1 0 0 1
Own Funds 1 1 5 0 0 1 1 1 4 1 0 1SCR 3 0 11 1 0 3 3 0 11 1 0 3MCR 2 2 2 0 0 2 0 0 0 0 0 0Variation Analysis 0 0 4 0 0 0 0 0 0 0 0 0Reinsurance 0 0 6 1 2 0 0 0 2 1 2 0Financial Stability 0 0 0 2 2 0 0 0 0 2 2 0Group Specific Templates
0 0 4 0 0 0 3 0 9 0 0 1
Total 10 14 75 9 7 13 11 10 48 14 7 9
In addition to this, there are 11 NSTs, of which 6 are for Non Life companies, and 5 are for Life companies.
Overview of Pillar 3 RequirementsQuantitative Reporting Requirements
Category
Individual Group
QRTs FSTsPublic
DisclosureQRTs FSTs
Public Disclosure
Day 1 Qrtly Annual Qrtly Annual Annual Day 1 Qrtly Annual Qrtly Annual Annual
General Information 3 2 3 2 2 0 3 2 3 2 2 0Balance Sheet 1 3 9 0 0 3 1 3 7 2 0 3Assets 0 4 9 3 0 0 0 4 9 5 0 0Technical Provisions 0 2 17 0 1 3 0 0 2 0 1 0Technical Provisions (transitional measures)
0 0 5 0 0 1 0 0 1 0 0 1
Own Funds 1 1 5 0 0 1 1 1 4 1 0 1SCR 3 0 11 1 0 3 3 0 11 1 0 3MCR 2 2 2 0 0 2 0 0 0 0 0 0Variation Analysis 0 0 4 0 0 0 0 0 0 0 0 0Reinsurance 0 0 6 1 2 0 0 0 2 1 2 0Financial Stability 0 0 0 2 2 0 0 0 0 2 2 0Group Specific Templates
0 0 4 0 0 0 3 0 9 0 0 1
Total 10 14 75 9 7 13 11 10 48 14 7 9
In addition to this, there are 11 NSTs, of which 6 are for Non Life companies, and 5 are for Life companies.
Preparatory Phase
Day 1 Quarterly
First Annual
Subsequent Annual
2 BS + 2 Asset
Full excep
t VA
VA templates
QRTs
Financial Stability Templates
Companies with assets > 12bn, subject to 50% market share
To be reported in Quarterly + 1 week deadline
Quarterly calculation of SCR
Full recalculation of Market Risk module
Overview of Pillar 3 RequirementsQuantitative Reporting Requirements
Additional information required through quantitative forms.
Overview of Pillar 3 RequirementsQualitative Reporting Requirements
Structure of SFCR/RSR
How long do they take to produce?
What information is already available?
How similar are the reports?
Pillar 3 challengesThe multiple dimensions of Pillar 3 Reporting
Increased complexity
Increased granularity
Tighter deadlines
Increased frequency
Organisation & Governance
Tech
no
logy
Re
po
rting P
roce
sses
DataForward Looking
Public disclosure
Efficiency, Traceability,
Comparability.
Clear allocation of roles and responsibilities.
Flexibility, Integration.Multiple stakeholders
4 Key Dimensions
Quality,Granularity,Auditability.
• 1st line of defense• 2nd line of defense• 3rd line of defense
• Information collection
• Information transformation
• Analysis• Sign-off• Disclosure• QA, etc.
SII reporting is a complex issue
that affects many
stakeholders
Identify the processes
Identify the roles
Pillar 3 challengesThe multiple dimensions of Pillar 3 Reporting
• 1st line of defense• 2nd line of defense• 3rd line of defense
• Information collection
• Information transformation
• Analysis• Sign-off• Disclosure• QA, etc.
SII reporting is a complex issue
that affects many
stakeholders
Identify the processes
Identify the roles
The amount of information to be produced is very large, and in very short timeframes.
Coordinating and setting clear roles and responsibilities is a key enabler in delivering a successful Pillar 3 project.
Auditability and traceability are one of the key outcomes of an effective risk management system.
There are multiple contributors in a Pillar 3 reporting cycle, and multiple users of the information.
Pillar 3 challengesThe multiple dimensions of Pillar 3 Reporting
Pillar 3 challengesThe multiple dimensions – Reporting Processes
5. Reporting processes
Reporting
QRTs, FSTs, NSTs
SFCR & RSR
Internal
Reports
1. Data processes 2. Calculation processes
3. Valuation of assets and other liabilities
4. Conso and aggregation processes
Life:
Contracts and
claims
Non life / Health:
Contracts and
claims
Asset Data
Accounting Data
Data sourcesData
CollectionCalculation
Conso. and aggreg.
Ris
k C
lass
agg
rega
tor
and
co
nso
lidat
ion
Risk
Market
MVL & Tech
Provisions Life
MVL & Tech
Provisions Non
Counterparty
Default Risk
Operational
Risk
Economic
Scenario
Generation
Cash Flow
projection Life
Cash Flow
projection
Non -life /
Health
Cash Flow
projection
Assets
Extr
act
Tran
sfo
rm a
nd
Lo
ad
Co
her
ence
co
ntr
ol,
valid
atio
n a
nd
sig
n o
ff
Val
idat
ion
an
d s
ign
off
Monitor and Control
Results:
SII Balance
sheet, Capital
Requirements
Operational
Losses
Counterparty
information
Life
Liabilities
Model Point
Assets
Model Point
Data Preparation
Experience
analysis and
assumptions
setting
External Market
Data
Co
her
ence
co
ntr
ol,
valid
atio
n a
nd
sig
n o
ff
Life Insurance
Risk
Non-life andHealth Risk
Asset
Pricing
Life and Health
Pillar 3 challengesThe multiple dimensions – Reporting Processes
5. Reporting processes
Reporting
QRTs, FSTs, NSTs
SFCR & RSR
Internal
Reports
1. Data processes 2. Calculation processes
3. Valuation of assets and other liabilities
4. Conso and aggregation processes
Life:
Contracts and
claims
Non life / Health:
Contracts and
claims
Asset Data
Accounting Data
Data sourcesData
CollectionCalculation
Conso. and aggreg.
Ris
k C
lass
agg
rega
tor
and
co
nso
lidat
ion
Risk
Market
MVL & Tech
Provisions Life
MVL & Tech
Provisions Non
Counterparty
Default Risk
Operational
Risk
Economic
Scenario
Generation
Cash Flow
projection Life
Cash Flow
projection
Non -life /
Health
Cash Flow
projection
Assets
Extr
act
Tran
sfo
rm a
nd
Lo
ad
Co
her
ence
co
ntr
ol,
valid
atio
n a
nd
sig
n o
ff
Val
idat
ion
an
d s
ign
off
Monitor and Control
Results:
SII Balance
sheet, Capital
Requirements
Operational
Losses
Counterparty
information
Life
Liabilities
Model Point
Assets
Model Point
Data Preparation
Experience
analysis and
assumptions
setting
External Market
Data
Co
her
ence
co
ntr
ol,
valid
atio
n a
nd
sig
n o
ff
Life Insurance
Risk
Non-life andHealth Risk
Asset
Pricing
Life and Health
Your Pillar 3 deliverables may be situated at the end of the reporting chain, but they cannot be dissociated from upstream processes.
An efficient upstream processes is a key enabler in meeting your Pillar 3 objectives.
It is important for the process to address information coming from multiple systems.
The timing and dependencies from multiple processes, people and systems must be recognised.
Pillar 3 challengesReporting Processes
Solvency II reconciliations
Solvency I
Solvency II Solvency II
Accounting
Solvency II(n-1)
Accounting(n-1)
Solvency II(n)
Accounting(n)
Day 1
reporting
First Annual
Reporting
Subsequent
Annual Reporting
Items to Reconcile?
Quantitative or Qualitative?
Where to Report?
Pillar 3 challengesData
Asset Data Challenges
Reporting gains and losses by asset class
Sourcing and compilation of data
Granularity of information
Collective investment vehicles
Identifying ring fenced funds
Valuation of assets and liabilities
Survey of IT Solutions for Solvency IIEvaluation process
38
14
24
0 10 20 30 40
Contacted
Decline/ Did not participate
Participated
3. Demonstration
sessions
4. Validation and
report
2. Request for
information
•Request
documentation from
Vendors
• 500+ question RFI
•Evaluate RFI
responses through
interview and
demonstration
sessions
•Validate the
evaluation with each
vendor
•Publish the report.
1. Short listing
• Identify the universe
of relevant solutions
•Define a short list
Overview of the Solvency II IT Market Since 2011 we have noted the appearance of Pillar 3 solutions
Number of References(log)
0
5
10
15
20
25
100 1000ActuarisERMS
Actuaris – IBNRS
Air Worldwide Clasic/2
Algorithmics – EconomicCapital and Solvency II
AlgorithmicsVIPitech
Aonbenfield ReMetrica
10
EQECAT- worldcat enterpriseTM
Guy CarpenterMetaRisk Tool Suite
IBM – SolvencyII Solution
Moody’s Analytics –Solvency II Product Suite
Orfival –GPMS
Ortec Finance ALS
RMS
SAS RMfI
Sungard –iWorks Prophet
Insureware –ICRFS-Plus
Datanomic - dn:Director for Solvency II
DataFlux –dfPower Studio
Trillium – EnterpriseData Quality
Oracle –OFSAA S-II
Addactis –Pillar 3 Asseco
BearingPoint ABACUS
Invoke FAS Regulatory S2
SecondFloor eFrame
Collibra
Diaku
Number of years since the first release
Solution surveyed in 2010 Solution surveyed in 2014
Legend
Pillar 3 SolutionsSample candidate solutions
Solutions specifically developed
for pillar 3 requirements:
Some solutions with broader
coverage…
• Templates for regulatory reports (e.g. QRTs) but also guaranty that
those templates will be maintained over time in.
• XBRL capabilities for generating automatically files in this required
format.
• Capability to monitoring report generation and sign-off
Characteristics required to address the issue Sample candidate solutions
Description of the issue
• Industrialise the process to produce, sign off and distribute quantitative (XBRL) & qualitative reports
• Leverage content to drive Business Intelligence to enable faster more effective decision making
Collect Prepare Calculate Report
ETL
Dat
a q
ual
ity
ESG
Experience analysis
Proxy Methodo.
Stress tests
Data
Liabilities data
Assets data
Market data
Other data
Model points
Accounting data
Operation and monitoring
Data historisation and archiving
Security Workflow & monitoring Scalability & performance
Data storage
Agg
rega
tio
n
Capital planning
KRI
Life TP
Health TP
ORSA
QRTs
XBRL
Assets
Non life TP Premium
Non lifeTP CO
Life standard
Life internal
Non life standard
Non life internal
Health standard
Health internal
Market standard
Market internal
Default standard
Default internal
Op.standard
Op. internal
Integration
Qualitative reporting
Internal reporting
And others…
How to differentiate Pillar 3 Solutions?What functionality does a best in class solution offer
Monitoring and Control: • Monitoring of report generation & automate the
testing of completed reports.
• Audit trail for any modification on data.
• Sign-off of the final report
Integration:• Ability to automate the population of calculation
results to generic reporting templates.
Internal reporting:• Execute ad-hoc queries.
• Modify regulatory reports for
internal Business Intelligence
QRTs:• Predefined templates for QRTs.
• Vendor updates software shortly after
template changes.
XBRL:• Engine to
automatically convert
a report to XBRL
format.
Qualitative reporting:• Predefined templates.
Data Quality: • Ability to run data quality checks
both on input data (i.e. calculation
results) and also reports.
What insurers need to do?Survey of Insurer Preparedness
Highlights of a survey conducted in Q1 2015 at 70 European insurers (18 in Ireland)
CFO / Finance function is typically is key sponsor / driver
firms at build, test or implementation of Pillar 3 project
‘on track’ for the preparatory measures,
Whilst less than 20% are close to being ‘fully operational’
Firms delivering a tactical solution. In contrast, 33% of firms
who are directly implementing a strategic solution
Firms have selected a Pillar 3 specific IT solution
39%
65%
60%
36%
31%
What insurers need to do?Technology
Organisation & Governance
Tech
no
logy
Re
po
rting P
roce
sses
Data
Buy v build?
Tactical vs Strategic
Speed, accuracy and
control including Data
Quality
Level of Automation:
Reduce the risk and
cost of manual work Integration with core
systems and upstream SII
technology
Flexibility &
Future Proof
What insurers need to do?Organisation and Governance
Organisation & Governance
Tech
no
logy
Re
po
rting P
roce
sses
DataApproval and Sign
offs
Documentation of
Auditable Standard
Review Process
Linkages between ORSA,
SFCR, RSR and QRTs
Integration to
current WDT Transfer from Project
to BAU teams.
Scope of data
requirements
Third party
dependencies
Data Validations &
consistency