The insurance industry prepares
Although there are still several months to go before full scope reporting begins under the new Solvency II Pillar 3 regime, the deadline for preparatory reporting is imminent for those insurance undertakings included in the first phase.
The focus of Pillar 3 of the Solvency II regime revolves around supervisory reporting and transparency requirements, and will mean a seismic shift upwards in the volume of data to be extracted and reported as well as the frequency of the report submissions.
So that it can manage and analyse the large amount of data reported under Solvency II, EIOPA has specified XBRL (eXtensible Business Reporting Language) as the filing format. Although XBRL is only mandatory between National Competent Authorities (NCAs) and EIOPA, some NCAs are insisting that their regulated firms also submit their quantitative returns in XBRL, with narrative returns submitted in some other electronic format. For example, the Bank of England/PRA requires quantitative reports in XBRL and narrative reports in PDF format. This will, however, vary from country to country.
EIOPA recognises a three stage approach to Solvency II regulatory reporting, each with its own different requirements:
- The preparatory phase, the period before the full Solvency II regulatory reporting requirements that take effect on 1st January 2016;
- The transitional phase, the four years following implementation on 1st January 2016; and
- The period from 1st January 2020, i.e. the end of the transitional phase, where the provisions Solvency II apply in full.
The count-down has begun and insurers need to be ready.
Challenges faced by preparers
A survey conducted in March this year by business advisory company Grant Thornton revealed that although many insurers expect to be ready in time for the new filing regime that starts at the beginning of 2016, a significant number fear they will not.
On a practical level, there are a number of challenges facing those now responsible for preparing the new reporting documents, not least of which is the need to produce many of the reports in XBRL format.
Other current issues can be summarised with the following questions:
- Do I need to report and when?
- What do I report?
- How do I report to my NCA?
- How do I keep up to date with taxonomy changes?
In a series of blog posts over the next few days we’ll analyse in more detail the challenges now faced by the insurance industry as Solvency II Pillar 3 reporting becomes a reality.