Feedback. of the German Insurance Association (GDV) ID-Nummer on the Roadmap for a Fitness check of supervisory reporting requirements

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1 Feedback of the German Insurance Association (GDV) ID-Nummer on the Roadmap for a Fitness check of supervisory reporting requirements Summary On 17 October 2017, the European Commission published a Roadmap for a Fitness check of supervisory reporting requirements. We welcome this evaluation and its intention to analyse the shortfalls associated with supervisory reporting. In our view, with regard to reporting requirements for the insurance industry there is an urgent need for review as the current requirements partly are an excessive burden for undertakings. Further it is questionable if all the data currently reported are actually useful for supervisory purposes. To enhance the effectiveness of the proposed Fitness check we would like to give feedback on the following aspects, which are described in detail below: - Scope of the assessment - Cost-benefit analysis - Expected results and purpose - Focus on reduction of complexity - Scope for improvement of efficiency Gesamtverband der Deutschen Versicherungswirtschaft e. V. German Insurance Association Wilhelmstraße 43 / 43 G, D Berlin Phone: Fax: , rue Montoyer B Brussels Phone: Fax: ID-number Contact: Dr. Axel Wehling Member of the Management Board a.wehling@gdv.de Götz Treber Head of Financial Regulation g.treber@gdv.de

2 1. Broaden the scope of the assessment According to the roadmap the scope of the Fitness Check shall be limited to primary legislation, i.e. Level 1. However, many requirements are given at subordinated level. For example the Solvency II Directive contains high level reporting requirements. Yet precise information which has to be reported, required data formats and reporting periods are defined in Delegated Regulation, Implementing Regulations and EIOPA guidelines. For instance, specific provisions regarding the Solvency and Financial Condition Report (SFCR) or the Regular Supervisory Report (RSR) can be found in Delegated Regulation 2015/35/EU and EIOPA Guidelines on Reporting and Public Disclosure. Whereas quantitative reporting requirements are set out in two separate Implementing Regulations: Implementing Regulation 2015/2450/EU for supervisory reporting and Implementing Regulation 2015/2452/EU for public disclosure. Thus, to be able to compare different reporting requirements and to identify existing overlaps and inconsistencies, subordinated legislation needs to be included in the assessment as well. This applies in particular with regards to the planned analysis at data element level. Otherwise it will not be possible to identify existing shortfalls. Therefore, we propose to broaden the scope of the assessment and to include Level 2 and Level 3 legislation as well. Among others, especially the following issues should be analysed to identify scope for improvement on all three Levels: Reporting for financial stability purposes and Solvency II Several fields of insurers supervisory reporting lack coordination. Although, some reporting templates for Solvency II and for financial stability reporting are identical, the reporting deadlines for quarterly and annual reporting for Solvency II and financial stability differ, forcing insurers to submit several, partly identical reporting sheets within a short period of time. A possible solution would be to adapt deadlines of financial stability reporting to Solvency II reporting and deleting redundant reporting elements. This would reduce the burden for insurers, particularly at the end of the year when supervisory and commercial reporting are due. Redundancies between SFCR, RSR, ORSA and QRTs One basic idea of pillar three is that the reporting distinguishes between addressees. Therefore, the requirements on SFCR, RSR and ORSA differ. Nevertheless, the delineation of contents of all three formats is not always clear, which leads to scope for overlapping information. For that reason the assessment should examine whether it is possible to prevent Seite 2 / 6

3 additional expense due to redundancies. Especially unnecessary descriptions of information, which is already reported in the QRTs, should be avoided. Extend of the Solvency and Financial Conditions Report Currently, the requirements on the Solvency and Financial Conditions Report (SFCR) demand numerous detailed information that is not directly connected with the solvency and financial situation of the undertaking. Nevertheless, the reporting of this information causes an excessive burden and ties up resources. Therefore, we suggest to identify scope for restriction within the assessment and to limit the disclosure requirements to the material information. Quarterly reporting on technical risks and technical provisions in Non-Life With very few exceptions, non-life insurance business is subject to annual contract durations. Decisions on reinsurance options are usually also taken annually, at the start of the year. In most cases, this decision is taken based on the claims development of recent business years, on an annual basis. Due to the random character of claims events as regards date and level of claims, little valuable knowledge can be gained from intra-annual calculations. Hence, it should be verified whether quarterly reporting of non-life technical provisions is necessary and appropriate. Fourth quarterly reporting Due to the fact that the limit to the submission of the fourth quarterly and the annual reporting almost coincide, the added-value of the reported information for the fourth quarter is questionable. Moreover, it has to be kept in mind that the requirements on both quarterly and annual reporting tie up resources which allows undertakings less room to react to changing market conditions and consumer s need. For that reasons the assessment should examine the possibility to report only on an annual level and to withdraw the fourth quarterly reporting. 2. Emphasise cost-benefit analysis Amongst others, the assessment shall analyse whether the reporting requirements are effective, relevant, bring added value to European supervision and are efficient. Although we support this purpose, the cost-benefit analysis of existing reporting requirements could be emphasised. Many data which have to be reported today are not necessary to comply with existing rules and regulations or for internal management purposes. As those data have to be determined solely for reporting purposes, as Seite 3 / 6

4 acknowledged in the roadmap, their production tends to be exceptionally cumbersome. Therefore, the supervisory benefits of such data needs to be significant to justify such reporting obligations as reasonable and proportionate. In our view, however, it is questionable whether data, which is not relevant for any other purpose can bring added value to supervision. One example for this is the reporting of the nominated ECAI under Solvency II as proposed by EIOPA in its Draft amendment to Commission Implementing Regulation (EU) 2015/2450 of 2 December According to this, the nominated ECAI has to be identified in template S.06.02, column c0330 by using a closed list which distinguishes not only the parent company of each rating agency group but also their subsidiaries. Insurance undertakings often do not know which subsidiary of a rating agency group issued a specific rating. It would be extremely burdensome for undertakings to identify the respective subsidiary. This effort would not be outweighed by the benefits for supervision as it is not recognizable if this information would be useful for supervisory practices since it is irrelevant to know which subsidiary issued a specific rating as all subsidiaries within the same group follow the same internal specifications. For the reasons mentioned above, we are of the view that the assessment of existing reporting requirements should focus on the following questions: - Are all data currently reported essential for supervision? - Can information needs be satisfied with data which is already used for internal purposes? - If new reporting requirements are necessary, how can they be integrated in existing formats and reporting systems? 3. Specify expected results and purpose According to the roadmap, the results of the assessment will identify potential areas where compliance cost and burdens stemming from reporting requirements could be reduced without compromising the objectives of these obligations. Thereby it remains open if and which kinds of action will follow this assessment. To increase its effectiveness, it would be helpful to not only identify potential areas for improvement but to make specific proposals for amendments as well. For instance, if overly burdensome reporting requirements are identified, it should be indicated, how the burden could be reduced, i.e. if the content of the submission, the frequency or the format should be amended. Another aspect is the current wording which indicates that the aim is to reduce cost and burden of reporting obligations by streamlining and sim- Seite 4 / 6

5 plifying them. To effectively reduce the burden of supervisory reporting one should not only adjust existing reporting requirements but also examine if they are necessary (cf. para 2) and suspend reporting obligations which do not generate added value for supervision. Based on the above, we recommend to specify what will be the result of this assessment and to clarify that reporting requirements itself could be reduced, i.e. not only their impact with regard to compliance cost and burden. 4. Focus on reduction of complexity The European Commission plans to examine supervisory reporting requirements across different financial sectors, e. g. banking and insurance. We support this approach as it allows to establish uniform procedures for supervisory reporting, thereby avoiding excessive reporting requirements which do not provide comparable results. However, in recent years a lot of reporting requirements have been established to capture information which is highly sector-specific. The implementation and maintenance of such highly sector-specific reporting systems was and is an enormous effort. In light of the above, we support the intention to harmonize various reporting requirements to increase transparency and comparability but the assessment should keep in mind that undertakings made major efforts to comply with recently introduced reporting requirements to satisfy supervisory requirements for sector-specific information. Therefore, any further changes should focus on reducing the complexity and cost of reporting requirements. 5. Scope for improvement of efficiency Another aim of the assessment is to analyse the efficiency of reporting obligations. Even though they might be reasonable and justified on their own, the undertakings suffer from the total volume. For that reason, we believe that the assessment should be used to determine the overall load of reporting obligations for undertakings with the aim of identifying potential for reducing this excessive burden. In this context, we believe it also should be examined whether reporting obligations follow the Single Entry Point - Principle, i.e. that all data are reported to one institution which distributes the information to other authorities. This Singly Entry Point al- Seite 5 / 6

6 lows undertakings to fulfil several reporting requirements with a uniform reporting process and to avoid duplicate reporting of information. Considering the above, we appreciate the objective to identify potential areas to improve efficiency of reporting requirements and recommend to keep in mind that the undertakings suffer from the excessive burden of reporting obligations. Berlin, 14 November 2017 Seite 6 / 6