Mind the Gap Reporting in a Solvency II World Carol Lynch, Maaz Mushir, John Kilbride

Transcription

1 Mind the Gap Reporting in a Solvency II World Carol Lynch, Maaz Mushir, John Kilbride 19 th May 2015

2 Agenda 1. Overview of Pillar 3 Requirements 2. Pillar 3 challenges 3. Industry preparedness on Pillar 3 4. What insurers need to do Disclaimer: The material, content and views in the following presentation are those of the presenter(s).

3 Overview of Pillar 3 Requirements Regular Reporting Requirements QRTs NSTs SFCR RSR Frequency Annual/ 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 at the 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 XBRL Electronic copy via company website Electronic copy Approval by Board Public Document For Annual templates only** Subset of templates are public Yes** Yes Yes No Yes No * Some Quarterly templates are required for Q2/Q4 only. ** Quarterly templates only require management approval. In addition to this, some insurers will be required to produce Financial Stability Templates.

4 Overview of Pillar 3 Requirements Solvency II Calendar RSR SFCR CBI Returns Opening Qualitative Information Quarterly Day 1 QRTs QRTs/NSTs Quarterly QRTs/NSTs ORSA Quarterly QRTs/NSTs Annual QRTs/NSTs Quarterly QRTs/NSTs

5 Overview of Pillar 3 Requirements Quantitative Reporting Requirements Category QRTs Individual FSTs Public Disclosure QRTs Group FSTs Public Disclosure Day 1 Qrtly Annual Qrtly Annual Annual Day 1 Qrtly Annual Qrtly Annual Annual General Information Balance Sheet Assets Technical Provisions Technical Provisions (transitional measures) Own Funds SCR MCR Variation Analysis Reinsurance Financial Stability Group Specific Templates Total In addition to this, there are 11 NSTs, of which 6 are for Non Life companies, and 5 are for Life companies.

6 Overview of Pillar 3 Requirements Quantitative Reporting Requirements Category QRTs Individual FSTs QRTs Public Disclosure QRTs Group FSTs Public Disclosure Day 1 Qrtly Annual Qrtly Annual Annual Day 1 Qrtly Annual Qrtly Annual Annual General Information Balance Preparatory Sheet Day BS 3+ 2 Asset 7 2 Quarterly 0 3 Assets Phase Technical Provisions Technical Provisions (transitional measures) Own Funds SCR MCR Variation Analysis Reinsurance Financial Stability Group Specific Subsequent First Templates VA templates Annual Annual Total Full except VA In addition to this, there are 11 NSTs, of which 6 are for Non Life companies, and 5 are for Life companies.

7 Overview of Pillar 3 Requirements Quantitative Reporting Requirements Financial Stability Templates Companies with assets > 12bn, subject to 50% market share Additional information required through quantitative forms. To be reported in Quarterly + 1 week deadline Quarterly calculation of SCR Full recalculation of Market Risk module

8 Overview of Pillar 3 Requirements Qualitative Reporting Requirements Structure of SFCR/RSR

9 Overview of Pillar 3 Requirements Qualitative Reporting Requirements Structure of SFCR/RSR How long do they take to produce? What information is already available? How similar are the reports?

10 Technology Pillar 3 challenges The multiple dimensions of Pillar 3 Reporting Increased complexity 4 Key Dimensions Increased granularity Increased frequency Tighter deadlines Clear allocation of roles and responsibilities. Organisation & Governance Reporting Processes Efficiency, Traceability, Comparability. Forward Looking Data Public disclosure Quality, Granularity, Auditability. Multiple stakeholders Flexibility, Integration.

11 Pillar 3 challenges The multiple dimensions of Pillar 3 Reporting SII reporting is a complex issue that affects many stakeholders Identify the roles 1 st line of defense 2 nd line of defense 3 rd line of defense Identify the processes Information collection Information transformation Analysis Sign-off Disclosure QA, etc.

12 Pillar 3 challenges The multiple dimensions of Pillar 3 Reporting There are multiple contributors in a Pillar 3 reporting cycle, and multiple users of the information. SII reporting is a complex issue that affects many stakeholders Identify the processes Information collection Information transformation Analysis Sign-off Disclosure QA, etc. Identify the roles The amount of information to be produced is very large, and in very short timeframes. 1 st line of defense 2 nd line of defense 3 rd line of defense 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.

13 Pillar 3 challenges The multiple dimensions Reporting Processes Extract Transform and Load Coherence control, validation and sign off Coherence control, validation and sign off Risk Class aggregator and consolidation Validation and sign off Data sources 1. Data processes 2. Calculation processes Data Collection Data Preparation 3. Valuation of assets and other liabilities Calculation 4. Conso and aggregation processes Conso. and aggreg. 5. Reporting processes Reporting Life: Contracts and claims Non life / Health: Contracts and claims Asset Data External Market Data Accounting Data Counterparty information Economic Scenario Generation Life Liabilities Model Point Assets Model Point Experience analysis and assumptions setting Cash Flow projection Life Cash Flow projection Assets Cash Flow projection Non -life / Health Life Insurance Risk MVL & Tech Provisions Life Market Risk Asset Pricing MVL & Tech Provisions Non Life and Health Non-life and Health Risk QRTs, FSTs, NSTs SFCR & RSR Operational Losses Counterparty Default Risk Internal Reports Results: SII Balance sheet, Capital Requirements Operational Risk Monitor and Control

14 Pillar 3 challenges The multiple dimensions Reporting Processes Extract Transform and Load Coherence control, validation and sign off Coherence control, validation and sign off Risk Class aggregator and consolidation Validation and sign off Your Pillar 3 deliverables may be situated at the end of the reporting chain, but they cannot be dissociated Data Data Data sources from upstream processes. Collection Preparation 1. Data processes 2. Calculation processes 3. Valuation of assets and other liabilities Calculation 4. Conso and aggregation processes Conso. and aggreg. 5. Reporting processes Reporting Life: Contracts and claims Non life / Health: Contracts and claims Asset Data External Market Data Accounting Data Counterparty information Operational Losses Results: SII Balance sheet, Capital Requirements Economic Scenario Generation An efficient upstream processes is a key enabler Life in meeting your Cash Flow Pillar 3 Liabilities projection Life Model Point objectives. Assets Model Point Experience analysis and assumptions setting Life Insurance Risk MVL & Tech Provisions Life Asset Pricing Cash Flow projection Assets It is important for Market Risk the process to Cash Flow projection Non -life / MVL & Tech Health multiple systems. Provisions Non Life and Health address information coming from Operational Risk QRTs, FSTs, NSTs SFCR & RSR Non-life and The timing and dependencies from Health Risk multiple Counterparty processes, people Internal and Default Risk Reports systems must be recognised. Monitor and Control

15 Pillar 3 challenges Reporting Processes Solvency II reconciliations Items to Reconcile? Quantitative or Qualitative? Where to Report? Solvency II Solvency II Solvency II (n-1) Solvency II (n) Solvency I Accounting Accounting (n-1) Accounting (n) Day 1 reporting First Annual Reporting Subsequent Annual Reporting

16 Pillar 3 challenges Data Asset Data Challenges Sourcing and compilation of data Granularity of information Collective investment vehicles Identifying ring fenced funds Reporting gains and losses by asset class Valuation of assets and liabilities

17 Survey of IT Solutions for Solvency II Evaluation process 1. Short listing 2. Request for information 3. Demonstration sessions 4. Validation and report Identify the universe of relevant solutions Define a short list Request documentation from Vendors 500+ question RFI Evaluate RFI responses through interview and demonstration sessions Validate the evaluation with each vendor Publish the report. Contacted 38 Decline/ Did not participate 14 Participated

18 Overview of the Solvency II IT Market Since 2011 we have noted the appearance of Pillar 3 solutions Legend Solution surveyed in 2010 Solution surveyed in Number of years since the first release Insureware ICRFS-Plus Sungard iworks Prophet 20 Algorithmics Economic Capital and Solvency II Trillium Enterprise Data Quality 15 Guy Carpenter MetaRisk Tool Suite Algorithmics VIPitech DataFlux dfpower Studio 10 Ortec Finance ALS Air Worldwide Clasic/2 EQECAT- worldcat enterprisetm Aonbenfield ReMetrica RMS 5 0 Orfival GPMS Oracle OFSAA S-II Moody s Analytics Solvency II Product Suite Diaku IBM Solvency II Solution SAS RMfI Addactis Pillar 3 Actuaris ERMS Actuaris IBNRS Collibra BearingPoint ABACUS Asseco Invoke FAS Regulatory S2 10 SecondFloor eframe Datanomic - dn: Director for Solvency II Number of References(log)

19 Pillar 3 Solutions Sample candidate solutions ETL Data quality Aggregation 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 Characteristics required to address the issue 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 Data Collect Prepare Calculate Report Sample candidate solutions Solutions specifically developed for pillar 3 requirements: Liabilities data Assets data Accounting data Market data Other data Model points ESG Experience analysis Proxy Methodo. Life TP Non life TP Premium Non life TP CO Health TP Assets ORSA Stress tests Life standard Non life standard Health standard Market standard Default standard Op. standard Capital planning Life internal Non life internal Health internal Market internal Default internal Op. internal KRI QRTs XBRL Qualitative reporting Internal reporting Some solutions with broader coverage Operation and monitoring Security Workflow & monitoring Scalability & performance Integration Data historisation and archiving Data storage And others

20 How to differentiate Pillar 3 Solutions? What functionality does a best in class solution offer Data Quality: Ability to run data quality checks both on input data (i.e. calculation results) and also reports. 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. Internal reporting: Execute ad-hoc queries. Modify regulatory reports for internal Business Intelligence 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.

21 What insurers need to do? Survey of Insurer Preparedness Highlights of a survey conducted in Q at 70 European insurers (18 in Ireland) 39% CFO / Finance function is typically is key sponsor / driver 65% firms at build, test or implementation of Pillar 3 project 60% on track for the preparatory measures, Whilst less than 20% are close to being fully operational 36% Firms delivering a tactical solution. In contrast, 33% of firms who are directly implementing a strategic solution 31% Firms have selected a Pillar 3 specific IT solution

22 What insurers need to do? Technology Technology Buy v build? Tactical vs Strategic Speed, accuracy and control including Data Quality Organisation & Governance Reporting Processes Data Level of Automation: Reduce the risk and cost of manual work Integration with core systems and upstream SII technology Flexibility & Future Proof

23 What insurers need to do? Organisation and Governance Technology Linkages between ORSA, SFCR, RSR and QRTs Integration to current WDT Transfer from Project to BAU teams. Documentation of Auditable Standard Review Process Organisation & Governance Reporting Processes Scope of data requirements Third party dependencies Approval and Sign offs Data Data Validations & consistency

24 Questions