Asset Data Collection & Solvency II. 13/14 September 2012

Transcription

1 Asset Data Collection & Solvency II 13/14 September 2012

2 Agenda Introduction Linda Zuberi The background Stuart Simpson The details Debbie Sallas Table discussions Wrap up 2

3 How involved are you in the collation of asset information sent in to Lloyd s? A. I was not aware that our syndicate asset data is submitted to Lloyd s B. I know that data is submitted but I am not involved 13 September Results: 66% 25% C. I am partially involved in the process 0% A 9% B C D D. I do it all 14 September Results: 69% 21% 10% 0% 3 A B C D

4 What is the extent of your understanding of the requirements of the Quarterly Asset Data (QAD) return required in 2013? A. What s a QAD return? 13 September Results: 68% B. I have a broad understanding but do not know the specifics 30% C. I have a detailed understanding. 2% A B C 14 September Results: 71% 24% 5% 4 A B C

5 The background Stuart Simpson, Treasurer

6 Investment assets at Lloyd s have continued to grow in recent years bn Premium Trust Funds Funds at Lloyd's Central assets Source: Lloyd s pro forma financial statements 6

7 although investment dispositions have changed little and remain conservative bn Central Assets FAL PTF Hedge Funds** Equities Corp Bonds (Investment Grade) Government Bonds * Corporate Bonds (subinvestment grade) Chain of Security Includes government agencies and supranationals ** Includes hedge funds, alternative and other assets Source: Lloyd s Treasury & Investment Management, as at 31 December LOCs Cash By Asset Class

8 We have been asking you for a lot of data about your asset dispositions Recent syndicate asset data collections Today QMA QMA QMA QMA QMA QMA QMA QMA Q Q Q Q Q Q Q Q LIM Asset Data LIM Asset Data LIM Asset Data Counterparty Exposure (Ad-hoc) QIS5 Standard Formula 8

9 as we make the transition to a more stable process under Solvency II Expected future collections QAD QAD QAD Dry Run QAD QAD QAD Q Q Q Q Q Q Q Q QMA QMA QMA QMA 9

10 although we will still need detailed information to meet SII requirements Syndicate QAD asset returns are designed to meet all future asset data requirements: Pillar 1 - Data required by the Lloyd s Internal Model (LIM) - Data to support standard model calculations Pillar II - Analysis for review by the Lloyd s Financial Risk Committee (FRC) Pillar III - EIOPA defined regulatory reporting to the FSA (PRA/FCA) Ad hoc analysis and reporting to all stakeholders 10

11 even though we will minimise the data we need from you by collating it ourselves Synd A Synd B Synd C Synd Member A Member B Member C Member Central assets Lloyd s Asset Database (LAD) Pillar I (LIM) Pillar II (FRC) Pillar III (FSA) Ad hoc analysis 11

12 Previously, we could describe Lloyd s asset dispositions at a high level LLOYD'S MARKET INVESTED ASSETS CORPORATE BONDS Cash & LOCs 27% Equities 3% Alternate assets 2% A 28% Below A 9% AAA 32% Corporate bonds 35% Government * 33% AA 31% Note: * Includes supranationals and Government agencies Source: Lloyd s pro forma financial statements, 31 December

13 today, we have better information Total Market Assets by Country of Origin Total Market Corporate Bonds by Sector Germany 3% Japan 4% Netherlands 4% Switzerland 1% France 2% Other 7% United States 42% Technology 2% Consumer 15% Utilities 3% Energy 4% Regional Government / Agencies 13% Australia 6% Communications 3% Canada 8% Industrial 6% United Kingdom 23% Basic Materials 1% Financial 53% 13

14 Asset data collection requirements under Solvency II are unavoidably onerous, but the data we collect from you, and its format, will be standard and consistent we are working to make the process as painless as possible for managing agents We need you to tell us what else we can do to help 14

15 the details Debbie Sallas, Manager, Investment Analysis & Operations

16 Agenda The Current Process: LIM Asset Data Collection Meeting Solvency II requirements: Pillars I and II The Future Process: Quarterly Asset Data Collection (QAD) The mission for a single submission: Pillars I, II and III 16

17 The current process Lloyd s Internal Model (LIM) Asset Data Collection 17

18 The current collection covers two of the three Solvency II pillars Pillar 1 - Data required by the Lloyd s Internal Model (LIM) - Data to support standard model calculations Pillar II - Analysis for review by the Lloyd s Financial Risk Committee (FRC) Pillar III - EIOPA defined regulatory reporting to the FSA (PRA/FCA) Ad hoc analysis and reporting to all stakeholders 18

19 we will be collecting this data from you again, as at 30 September, on 2 November There are three key areas where we have encountered issues in previous collection processes: Listing of cash exposures by counterparty Investment funds: look through approaches Derivatives used for hedging 19

20 The LIM needs to model Lloyd s significant cash credit exposures at counterparty level Assets classified as Cash and Deposits must be listed with the bank counterparty Lloyd's Market Assets We have provided a list of the most commonly used banks in the template The LIM target is to have information for 80% of cash assets by counterparty So we need to look through to underlying exposures of money-market investment funds This will allow the LIM to properly capture concentrations of cash credit risk at Lloyd s ¹ Includes supranationals and Government agencies 20 Source: Lloyd s pro forma financial statements, 31 December 2011

21 Your choices when reporting investment fund exposures are important Solvency II offers three choices when you report investment fund exposures: Security level look through: list each underlying investment Mandate level look through: using the fund prospectus to estimate underlying exposures No look through: the fund will be classified as Other, which assumes a high level of risk 21

22 we ask that you consider both risk and materiality when deciding how to report Risk Materiality 22

23 we ask that you consider both risk and materiality when deciding how to report Risk No Look Through Security Level Look Through Materiality 23

24 we ask that you consider both risk and materiality when deciding how to report Risk No Look Through?? Security Level Look Through Materiality 24

25 A practical approach to granularity takes us to 135,000 rows of data Granularity Lloyd s SCR 1 Summary bucketed data 254 Applying buckets for each syndicate 30,000 Data as collected 135,000 Full look through by entity >8,500,000 25

26 Correct reporting of derivatives allows us to properly capture the impact of hedging Most derivative use in syndicates is for the purpose of hedging foreign exchange or interest rate exposures Where we have full information we can incorporate the impact of such hedging for LIM modelling purposes The LIM does not model complex derivative structures 26

27 There are some minor changes to the data collection template for September 2012 Where possible, the template has been simplified and the number of fields reduced All security level assets are captured in a single form Asset classifications are limited to the underlying asset categories as specified by EIOPA New integrated validation to assist with accurate template population Additional information relating to derivatives is requested 27

28 From May 2013 the collection process will change Quarterly Asset Data (QAD) Collection 28

29 The QAD will provide us with all of the asset data required for Solvency II Pillar 1 - Data required by the Lloyd s Internal Model (LIM) - Data to support standard model calculations Pillar II - Analysis for review by the Lloyd s Financial Risk Committee (FRC) Pillar III - EIOPA defined regulatory reporting to the FSA (PRA/FCA) Ad hoc analysis and reporting to all stakeholders 29

30 this will include some new information, to meet Pillar III requirements Issuer sector Still undecided by EIOPA, however NACE codes are still the most likely option Acquisition cost Complementary Identification Codes (CIC) EIOPA developed classification; categorising all assets by country of origin and asset type After much lobbying, Bloomberg are developing their systems to provide (and maintain) this as a new field 30

31 Complementary Identification Code (CIC) table CIC codes; another new requirement, but not complicated in practice First 2 positions Third position Asset listed in T /28/2018 GOVT CIC = US11 Category Government bonds Corporate bonds Equity Investment funds Structured notes Collatera securi Central Government bonds Common bonds Common equity Equity funds Equity risk Equity Supra-national bonds Convertible bonds Equity of real estate related corpora ti on Debt funds Interest rate risk Interes risk Regional government bonds Commercial paper Equity rights Money market funds Currency ri s k ISO 3166 Currenc Municipal government bonds Money market i ns truments Preferred equi ty BlackRock GBP Liquidity Fund Credit CIC risk = GB43 Asset allocation funds Credit

32 EIOPA requires multiple tiers of asset reporting Primary Tier Secondary Tier Individually held assets Structured Products Derivatives Syndicate Assets Security level look through Investment fund (CIC ##4#) Mandate level look through No look through (Other) 32

33 LTIM have engaged with some asset managers about likely requirements of Lloyd s clients BlackRock Goldman Sachs RBS Schroders State Street UBS Western Asset Management 33

34 LTIM will also be providing data for centrally managed funds for the QAD Lloyd s has sought agreement from the FSA for centrally managed funds to be treated as investment funds Reduced reporting requirements Data for the LTIM managed overseas trust funds, ASL and commingled PTF funds will be provided to participants 34

35 In summary There will be one more collection using the current template, in November From 2013 you will need to provide QAD submissions to Lloyd s via the Core Market Returns system We have been working to make this process as easy as we can... but we need to know what else we can do to help? 35

36 Group Table Discussion Questions What level of look through do you apply to your investment funds for internal model purposes? What have been the main drivers (materiality/risk etc) in determining the level of look through applied to your investment funds? Who/how will you apply CIC codes to your investments? Do you foresee any problems with the additional data requirements, if so which ones and why? How involved is your Investment Manager in providing investment data? What can we do to help facilitate the process of collecting asset data? 36

37 How useful have you found today s session? A. Very useful and I have learnt something B. Useful and we will use the slides for reference 13 September Results: 70% C. Useful, but greater technical guidance would have been beneficial D. Not very useful 16% 14% 0% A B C D 14 September Results: 57% 30% 11% 2% 37 A B C D

38 How have you found the format of today s workshop? A. I liked having a discussion session and the balance was good B. The discussion session should have been shorter 82% 13 September Results: C. The discussion session should have been longer D. Would prefer a presentation only with no discussion E. Other A 82% 11% 2% 2% 2% B C D E 14 September Results: 5% 2% 9% 2% 38 A B C D E

39 Would it be helpful for us to run a similar workshop with your investment managers? A. Yes, the same workshop would be helpful 13 September Results: 82% B. Yes, but the content should be adapted to be more suitable for an Investment Manager audience C. No D. No view 14% 5% 0% A B C D 14 September Results: 54% 43% 2% 0% A B C D 39

40 Contact Details Stuart Simpson, Treasurer Linda Zuberi, Senior Investment Manager Debbie Sallas, Manager, Investment Analysis & Operations 40

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