PRA Solvency II regulatory reporting industry working group - 19 December 2013

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1 PRA Solvency II regulatory reporting industry working group - 19 December 2013 Industry attendee Representing PRA/Bank of England attendee Paul Appleton Lloyd s Giles Fairhead Chair Head of Department, Retail Life and project lead Patricia Hakong LMA Mattia Branca Supervisor and project business manager Jim Galbraith Scottish Friendly Elzbieta Woynowska Reporting Policy For AFM Steve Dixon Steve Dixon Associates For AFM Joanna Rose Regulatory Data Group Russell Worsley Robert Chorley Roni Ramdin Rebecca Wyatt Andrew Smith Tristan Garnons- Williams Willem van der Westhuysen Gareth Mee Lancashire Group For IUA (Alternate for Nick Lowe Aviva RSA Prudential XL Group ABI Thomas Miller For P&I Clubs IMA (Alternate for Susan Wright) Jonathan Crees James Warren Alastair Campbell Rachel Butler Information Service Technology Division Solvency II IT Delivery Manager project manager Solvency II Communications These notes are intended as a record of the discussions held at the PRA on 19 December They are not verbatim minutes and, for the benefit of those organisations that are not members of the industry working group, indicate the themes of the discussion and questions that were raised. The views expressed are those of the industry members and do not represent guidance from the PRA. For further clarification on aspects of the notes firms should contact the appropriate industry representative. Similarly, to raise questions and issues on regulatory reporting for discussion at the working group, both in the preparatory period and at Solvency II implementation, firms should address these to an appropriate industry representative. If firms are not represented at the working group by a member organisation they should get in contact with their usual supervisory contact and ask that the query is passed to Giles Fairhead, Chair of the PRA Solvency II regulatory reporting industry working group. Those firms that do not have a named supervisory contact can reach the PRA Firm Enquiries Function at [email protected] or

2 Contents: Notes from the meeting on 19 December 2013 covering agenda items on: 1. Known issues today 2. XBRL 3. Questions raised during the meeting are listed at the end of this document. 1. Known issues today a) Issues with data not existing b) Issues with access to data c) Issues related to lack of clarity in requirements Purpose of agenda item: for the industry to provide examples where the collection and provision of data to the PRA is expected to cause specific implementation issues; identify issues that are common to many sectors and multiple firms across the industry; and use the outputs from the discussion to support the identification of Q&As and areas for focus at future meetings. 1a) Known issues with data not existing i) Assets Industry members commented that there is a lack of availability of appropriate codes to use in the assets template. NACE codes are not mapped for all assets. Legal Entity Identifier (LEI) codes are currently unavailable and there is no certainty on when they could be provided. Industry indicated that there is an issue of increased costs when using external ratings and indicated a preference for an option to provide internal ratings on some assets. There is general uncertainty from industry members whether asset data purchased from data vendors, such as above, can be shared freely with the PRA. ii) iii) Assets D4, Assets D5 and Assets D6 Requirements of D4 template are not aligned to how firms manage these assets. There are practical difficulties on reaching solutions for the market to provide data on a look-through basis freely to all insurers before Solvency II implementation. Where an insurer operates asset lending via a custodian which pools multiple clients assets, it is complex to complete D5 and D6 at the level of detail required. Fund of funds Industry group identified differences on levels of detail accessible when the asset manager is external vs. internal to the firm. The industry group highlighted particular challenges in gathering asset data on fund of funds more than a single layer down when the asset manager is external.

3 iv) Intragroup transactions Concerns were raised at the potential number of transactions that would have to be reported and current lack of clarity on the materiality thresholds applicable to transactions. Members commented they were making materiality assumptions that would apply, but recognise that materiality for group transactions could have significantly different interpretations across other National Competent Authorities leading to inconsistency. Linked issues included: Availability of detailed transactions data where arrangements go back decades. Making simplifying assumptions on the inclusion or exclusion of transactions solely between non-eea subsidiaries all based in the same country that report to an EU regulated entity. 1b) Known issues with access to data The industry group highlighted a number of areas where access to data could be an issue. Up-to-date reinsurance treaty data on a quarterly basis, where insurers rely on brokers to provide data to meet submission deadlines. Industry members are assuming data prepared on a roll-forward basis for quarterly reporting. For life groups some companies are interpreting underwriting profit on G01 to be equivalent to IFRS operating profit used in Group reporting, as there is no underwriting profit concept for life business. Legal entities for group reporting - having to report data for every legal entity if the entity does not map to a current consolidated reporting unit. E3 (non-life insurance claims info) access to underlying claims data going back over 15 years for some entities. Gross salvage and subrogation numbers, usual practice is to show these net of claims rather than gross. Country of risk data for assets data template on a consistent basis across firms. Disclosure of data by product, if some product lines cannot be aggregated where there are no material product differences. 1c) Known issues with clarity of requirements Members highlighted areas where assumptions are being made to resolve a lack of clarity. For template cover A1, assumption that insurance expenses relate to insurance activities only within the group, not all activities within the group. For template cover A1, assumption that written premiums include bound but not written policies. Areas where more information is needed included. Consolidation of investment funds NB: EIOPA is expected to issue further information in this area during Q National specific templates (NSTs) NB: As per paragraph 5.5 in SS4/13 Any national specific templates for reporting under Solvency II which are developed in due course by the PRA will be subject to the PRA s usual consultation process, including consultation as to whether it may be appropriate for firms to complete these templates during the preparatory period. The PRA will provide further information on NSTs at working group meetings as appropriate. (See also Q&A 3) Information on how public disclosure QRTs will work. NB: The PRA expects the Implementing Technical Standards (ITS) to include more detail.

4 2) XBRL Purpose of agenda item: discuss the planned use of XBRL and issues relating to its implementation; and highlight implementation considerations and challenges identified by firms. PRA comments: Planning assumptions The PRA is planning for and will be developing systems for the submissions of QRTs using the EIOPA XBRL taxonomy for implementation in 2016 and the preparatory guidelines. It is important firms and the PRA prepare for end-to-end reporting as fully as possible by using the same basis of submission for both preparatory and full implementation reporting. The PRA believes firms should be ready for six months before full implementation using XBRL to mitigate against potential complications arising in the final few months before Solvency II implementation. Stability The templates selected for the preparatory phase are considered to be stable Taxonomy and further releases The PRA expects firms to refer to the taxonomy published by EIOPA supporting the Guidelines on Submission of Information to National Competent Authorities: EIOPA released an updated version of the preparatory guidelines taxonomy in January The PRA understands a final version is planned for release in May 2014, allowing firms 12 months to prepare for submitting harmonised preparatory guideline submission in mid Additionally, the PRA understands EIOPA plan to release the final version of the full Solvency II templates and taxonomies in Q4 2014, again allowing firms at least 12 months to prepare for full submission in Comments raised by industry include: Concerns about readiness of EIOPA taxonomy, and consequently a reluctance of suppliers to contract where taxonomies are considered unstable. Concerns over potential need to manually tag data or duplicate tagging of data between preparatory period and full implementation. Lead time for selecting an XBRL provider and implementing the IT solution. The PRA noted general concerns about the use of XBRL in the preparatory phase and asked industry members to provide specific examples. Industry feedback has lacked specific information such as the detail on what vendors are lacking in order to factor this into XBRL delivery plans, incremental costs to firms in changes in taxonomy over time and incremental costs and lead times of manual tagging.

5 3) Questions, 19 December 2013 A number of questions were raised at the meeting which the PRA has noted and will respond in due course as appropriate. 1a) Known issues with data not existing i) Assets Q1: Will the PRA offer firms any flexibility in the preparatory period to enable them to use other types of asset codes until a more complete situation exists? Q2: Does the PRA prioritise some asset data fields over others? ii) Assets D4, Asset D5, Assets D6 Q3: When is policy certainty expected on the materiality threshold for the % of holdings subject to look-through? iii) Fund of funds Q4: How many layers of look-through for fund-of-funds will be accepted by the PRA? iv) Intragroup transactions Q5: If firms are making assumptions regarding materiality is the PRA aware of any EIOPA guidance to clarify the position? a) And/or will PRA accept these assumptions? b) What interpretation will the PRA make, as the NCA? 1b) Known issues with access to data Q6: Will the PRA take advantage of the ability under Omnibus II Directive to remove quarterly reporting requirements for cat 4 and 5 firms? Q7: What is the latest position on whether data will need to be audited? Q8: If assets are held in a ring-fenced fund by a Spanish or French subsidiary should they be aggregated? 2) XBRL Q9: If vendors can t deliver an XBRL solution would the PRA view manual tagging as disproportionate, due to resource costs and timescales of completing the work?