PRA proposes simplifying Solvency II reporting and disclosure requirements
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The Prudential Regulation Authority has proposed to streamline Solvency II reporting and disclosure requirements for insurers and to improve the collection of data in areas where reporting is “currently not tailored appropriately to the features of the UK insurance sector”.
If the proposed changes are accepted, the PRA intends to implement them for quarterly and annual reporting reference dates falling on and after 31 December 2024.
The authority believes the proposals would reduce ongoing reporting costs for firms and improve competitiveness and proportionality.
“In the absence of any reform, the PRA considers existing Solvency II reporting may contain some information that is not used extensively by the PRA, and in some areas the existing information reported does not adequately address supervisory needs.”
The proposed changes include editing, removing and changing the reporting frequency of certain reporting templates and introducing new templates for certain topics.
The PRA proposes to delete the following nine quantitative reporting templates (QRTs) and three national specific templates:
· S.05.01 Premiums, claims and expenses by line of business;
· S.07.01 Structured products;
· S.08.02 Derivatives transactions;
· S.21.01 Loss distribution risk profile;
· S.21.03 Non-life distribution of underwriting risks – by sum insured;
· S.30.01 Facultative covers for non-life and life business basic data;
· S.30.02 Facultative covers for non-life and life business shares data;
· S.31.02 Special Purpose Vehicles;
· S.36.03 IGT – Internal Reinsurance;
· NS.05 Revenue account life;
· NS.06 Business model analysis (life); and
· NS.12 The Society of Lloyd’s Solvency Capital Requirement.
Writing on LinkedIn, Matthew Francis, insurance director at KPMG UK, said many insurers will welcome the removal of these templates.
Reporting on new topics
The watchdog is also considering adding new reporting templates for certain topics. For instance, it said cyber risk presents unique risks and challenges in comparison to traditional lines of businesses and is not reported on a separately identifiable basis.
The authority proposed a new annual template to report the types of cyber risk coverages provided, the potential accumulation of risks and the risk mitigation techniques used by solo and third-country branch entities.
No additional requirements for IFRS 17 for now
The PRA considered the impact of the IFRS 17 on regulatory reporting, but in order to ensure proportionality, at this stage, it does not propose to collect additional information that is specific to the standard.
Once IFRS 17 is introduced, the uses and benefits of this information should become clearer, the authority said, and it may consider introducing such proposals at a future date if appropriate.
Review of SFCR, RSR and other requirements on the table
The scope of Treasury’s review of Solvency II is much broader than reporting and covers other areas of reform excluded from the PRA’s consultation paper such as the matching adjustment and risk margin, transitional measure on technical provisions, internal models and the group solvency capital requirements.
The PRA plans to consult on these other areas of reform and potential technical changes to the reporting templates and disclosure requirements on these topics at a later date.
In addition, the regulator is looking to review and consult on the existing requirements of the Solvency and Financial Condition Report and regular supervisory report “in due course”.
Reforms of Solvency II are also taking place in tandem in the EU. In an interview with Insurance Europe last month, Markus Ferber MEP considered Brexit a “special threat” and warned of the divergence of Solvency II, saying that the UK could adjust the regime “in another way than [the one] we are adjusting”.
Are there further Solvency II requirements that need to be simplified?