PRA Solvency II regulatory reporting industry working group, 25 September 2015

Transcription

1 PRA Solvency II regulatory reporting industry working group, 25 September 2015 Firm representative Siddharth Maheshwari Roni Ramdin Rebecca Wyatt Steven Findlay Andrew Smith Kim Harmer Steve Dixon Susan Wright Russell Worsley Jane Tusar Mike Schofield Angus McLean Bank of England Giles Fairhead - Chair Elzbieta Woynowska Joanna Rose Beju Shah Peter Shirley Rachel Butler Sylwia Ladon Apologies Nick Lowe Paul Appleton Patricia Hakong Jim Galbraith Willem van der Westhuysen Olga Yevmenchikowa Organisation and representing Aviva for ABI RSA for ABI Prudential for ABI ABI XL Group, for ABI E&Y for ILAG Steve Dixon Associates, for AFM The Investment Association Lancashire Group, for IUA Society of Lloyd s Assurant Solutions, for ABI Baillie Gifford & Co, for ABI Role Head of Department, Solvency II reporting project lead Reporting Policy Regulatory Data Group Information Service Technology Division Solvency II reporting project manager Solvency II Communications Solvency II Programme IUA Society of Lloyd s LMA, resigned from PRA Solvency II industry working group Scottish Friendly for AFM Thomas Miller, for P&I Clubs Aviva for ABI These notes are intended as a record of the discussions held at the PRA on 25 September 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, firms wishing to raise questions and issues on regulatory reporting for discussion at the industry working group, both in the preparatory phase and at Solvency II implementation, should address these to an appropriate industry representative. If firms are not represented at the industry working group by a member organisation they should submit their question to: PRASIIregulatoryreporting@bankofengland.co.uk 1

2 Notes from the meeting on 25 September 2015 covering agenda items: 1. Welcome to new members 2. The next three months to implementation 3. EIOPA developments 3.1 EIOPA developments and recent PRA publications 3.2 EIOPA developments - Taxonomy for SII implementation 4. PRA feedback on preparatory phase 5. PRA s approach to data analytics 6. PRA position on outstanding issues 4.1 ABI paper on proportionality and materiality 4.2 Approach to audit of Solvency II regulatory returns 5. Next meeting and close 1. Welcome to new members Terms of Reference for the PRA s Solvency II industry working group are available on the industry working group page of the Solvency II section of the Bank of England s website. Nominations for working group attendance were sought in Q from different trade associations to represent the UK insurance industry. Additional members now join the PRA s Solvency II industry working group as both the end of the preparatory phase and Solvency II implementation approaches. As a reminder the working group is intended to: act as a forum between the PRA and industry to discuss topics related to the implementation of Solvency II regulatory reporting; give the opportunity for the PRA to share information with industry, and vice versa, as firms make their preparations for regulatory reporting; and give an opportunity for the PRA and firms to share planning assumptions. 2. The next three months to implementation Publication w/c 21 September of feedback on preparatory phase submissions received in July Increasing engagement with firms submitting for the first time in 2016 New members join the PRA Solvency II industry working group 22 October regulatory reporting seminar Testing sub group will continue next meeting 9 October 2015 Firms can submit XBRL files via for XBRL testing ahead of preparatory phase quarterly submissions. The Bank of England will offer feedback on a reasonable endeavours basis from mid- October 2015 Hope to make a BEEDS test environment available in Q for use by all firms May hold a technical event for firms in January 2016 tbc Would firms see a value in this type of event? 2

3 3. EIOPA developments 3.1 EIOPA developments and recent PRA publications The final version of the second set of ITS is with the European Commission, following EIOPA s submission on 6 July 2015 The PRA published: CP25/15 Solvency II: reporting and public disclosure - options provided to supervisory authorities SS36/15 Solvency II: life insurance product reporting codes SS37/15 Solvency II: internal model reporting codes and components Q1: Firms asked whether there are likely to be any delays to the ITS, and whether there would be any changes to the reporting requirements and timeframes. A1: The PRA stated that the European Commission s review of the supervisory reporting and public disclosure ITS is ongoing and there have been some editorial queries which may necessitate editorial changes. If this would result in significant delays the PRA would communicate with industry accordingly and implement contingency plans. Firms should note that the latest revision of the Delegated Act has set out that the submission date for Day 1 reports for groups should be six weeks later than the original submission date of 20 May 2016, therefore groups should submit their Day 1 reports on 1 July EIOPA developments: Taxonomy for SII implementation a) General points to note on Taxonomy Taxonomy v2.0.0 published 31 July 2015 Should be used to begin IT implementation Taxonomy v2.0.1 (hotfix) to be published as Release Candidate w/c 21 September 2015 Subject to NCA and industry review Final publication of v due w/c 21 October 2015 Phased implementation of validation rules Only a subset of validations will be implemented in the taxonomy at this stage, those that EIOPA are sure work in practice Intended to avoid mass deactivations Taxonomy timeline for 2016 to be determined. As previously indicated, firms should prepare for ongoing change. This could be one major and one minor change each year a) Precision and Tolerance EIOPA filing rules for Solvency II post-implementation Data points in templates S.06.02, S.08.01, S and S that are monetary values must be reported in units to two decimal places Data points in all other templates that are monetary values must be reported in units without decimals Validation tolerances for monetary values in templates S.06.02, S.08.01, S and S

4 Value range (units) attribute value Tolerance (units) Any value to 2 = 2 + / Any value to 2 = INF Precise value Validation tolerances for monetary values in all other templates Value range (units) attribute value >= >= -4 >= 1,000,000 and < >= -3 >= 1,000 and < >= -2 > 0 and < >= -1 Tolerance (units) = -4 is used the tolerance is + / = -3 is used the tolerance is + / = -2 is used the tolerance is + / - 50 = -1 is used the tolerance is + / - 5 attribute should not equal the number of decimal places used for the value otherwise the tolerance is reduced. b) Codes and type of codes Firm / entity identifiers LEI codes must have prefix LEI/ e.g. LEI/ LEICODE321 All other codes including FRNs must have prefix SC/ e.g. SC/ Financial instruments ID codes in S and S must be use the appropriate prefix for the financial instrument e.g. ISIN/ If a code is not known or is not in the list, the CAU/ is the default A URL must not be used Failure to observe these rules will lead to submissions failing the EIOPA filing rule checks. See the Bank of England s Solvency II XBRL filing manual section 4 for instructions and section 5.3 for examples c) Filing rules NCAs are required to implement and check submissions against the EIOPA filing rules. All MUST EIOPA filing rules will be implemented on BEEDS for the quarterly returns Firms should ensure they are familiar with the EIOPA filing rules detailed in the Bank of England Solvency II XBRL filing manual Current filing manual is aligned to preparatory reporting 4

5 This will be updated in January to align with SII implementation d) Tool 4 Undertakings A number of firms appear to be using T4U for either reporting or testing. Majority are using it for testing their files EIOPA will no longer be developing or supporting this tool They are not, nor should be, software providers Intention is to move it to an open-source model Discussions with market have commenced Future is not clear Firms who use it should make contingency plans Market has a range of SII reporting tools available EIOPA s aim of preparing the market has largely been achieved 4. PRA feedback on preparatory phase a) Process overview b) Summary Submission of preparatory phase data generally went well Aided by involvement of firms participating in testing sub-group and additionally the testing of XBRL files ahead of submissions Discussions at IWG demonstrated that firms have been working for some time to ensure compliance and these preparations paid off Returns received by 103 solo firms and 34 groups EIOPA 80% target achieved 5

6 Only EIOPA data validation checks and limited plausibility checking took place this will increase from 2016 and build year on year as the PRA gathers more data and gains more experience c) Data submission BEEDS portal launched and firms successfully on boarded on time Considerable focus on working with firms on quality of XBRL ahead of submission deadline without this many firms would have been unable to submit their returns as the XBRL would not have been of high-enough quality all firms must work with their vendors to ensure XBRL files meet requirements, including EIOPA filing rules The PRA hopes to offer a test environment early in 2016 so that firms can test their whether their XBRL files meet the requirements d) Data quality There are three distinct stages where data quality issues will be found: 1. Automated EIOPA validation checks upon firm submission No significant issues, in the preparatory phase. However EIOPA had turned off a lot of the checks prior to the submission deadlines. More issues expected in the future as more checks become active. 2. Plausibility checks undertaken by Bank of England regulatory data specialist team Limited number of checks currently exist, this will increase In particular lack of reference data mean comparative data checks difficult Key area of significant weakness was asset data quality 3. Analytical review by firm supervisors and other Bank of England staff via new data analytics tools New analytics tool and team now established Significant investment in tools to analyse the data, therefore firms should expect an increase in feedback from their supervisors Developing dedicated asset analysis tools e) Data quality focus on assets List of assets form (S.06.02) provides a much more detailed analysis than under Solvency I Some firms submitted up to 100k rows of asset data across 30 columns, with over half a million rows of data collected across all preparatory phase submissions Checks found the following common issues: A mixed approach to providing information on asset issuer Different approaches to categorisation Over-use of other category Incomplete data sets re corporate bond credit ratings and sector information NACE codes, CIC, LEIs were also issues 6

7 Q2: Firms asked if the Bank of England will publish its plausibility checks to help firms submit data to the required status? A2: As stated at previous IWG meetings firms were reminded that plausibility checks are internal checks and currently it is not intended that these will be published. The PRA will keep this under review and in due course may convert some plausibility checks to validation checks which it would make public. Q3: Firms asked for an overview of the timescales involved in the plausibility checking process. A3: The Bank of England is working towards achieving a 5/2/5 model in the early years following Solvency II implementation i.e. a firm s return will be checked over five working days, the firm supervisor will have two days to offer any input and view on the firm s data submission as necessary, and if required the firm will have five days to respond or resubmit as appropriate. Q4: Firms asked whether there were plans to offer a test environment for them to submit their returns to the PRA in advance of making their Solvency II submissions. A4: The Bank of England confirmed it is their intention to make a test environment available in mid to late Q1 2016, depending on systems developments and availability. Firms will be advised of this via their principle users. Q5: Firms asked if there were any plans to publish further feedback on the preparatory submissions, particularly the qualitative returns.. A5: The PRA confirmed that it will consider publishing further feedback, particularly when it is possible to offer further insight to and analysis of the asset data. The PRA will review the qualitative returns received in the first half of 2016 and may offer feedback in the second part of 2016, to help firms prepare for the first Solvency II annual submissions in The PRA s approach to data analytics Major investment in analytical tools Upscales the PRA s analytical capabilities Ring-fenced internal resources Multi-year project Analysis of the Solvency II regulatory data is a key focus for the PRA and will drive supervisory capabilities Step change that will revolutionise the PRA s quantitative analysis, management information and analytical capability Supervisors now have access to tools and their analysis of the data has commenced Currently three tools either available to users or in the final stages of testing Tool to analyse solo returns Tool to analyse group returns Tool to analyse assets data 7

8 Also working on a bespoke analysis and MI development as part of first phase of work Three year analytics development plan currently being drawn up by dedicated analytics team to continue to roll out tools, MI and analysis to Bank users Q6: Industry members asked how the data analytics will be used for monitoring the submissions from smaller firms. A6: The PRA confirmed that smaller firms can expect a more thorough review of their reporting submissions as the new data analytics tools being developed are more sophisticated than previous tools and will allow for detailed and sophisticated analysis and evaluation. 6. The PRA s position on outstanding issues a) ABI paper on proportionality and materiality The Delegated Act will be incorporated directly into the UK approach and it is therefore difficult to provide prospective national guidance on how materiality should be interpreted as it creates a legal risk for the PRA The PRA will ensure EIOPA understand the desire for further guidance in this area Firms are encouraged to continue to raise concerns and questions with EIOPA (for example through the ABI and CFO Forum) Firms are reminded that they need to decide on their use of thresholds and approach, taking into account their current circumstances and environment they operate in b) Audit of Solvency II regulatory returns EIOPA issued a statement supportive of the external audit of Solvency II reporting The PRA anticipates that, to some extent, there will be an audit requirement of firms public regulatory reporting for solos and groups. Audit opinion would be properly prepared in all material respects, in accordance with the Solvency II regulatory framework. The PRA will consult in Q Scope currently discussion, broadly in line with the draft EIOPA guidelines, but internal model and partial internal model SCR subject to further considerations. The PRA s initial view: Valuation and capital management sections of the Solvency and Financial Condition Report (SFCR) Balance sheet and own funds templates Solvency capital requirement templates for insurers on standard formula Approvals granted to undertakings by the PRA will be out of scope SCR for firms using approved models will be out of scope impact on risk margin in technical provisions in balance sheet Private reporting will be out of scope S Close and next meeting Next meeting proposed for January