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Update on Solvency II Pillar 3 Asset Management Reporting

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Q1 2014

Pillars

The trials and tribulations of Solvency II have over the last few years migrated from specialist insurance and asset management publications to the established broadsheets. The process of compromise and negotiation has seen the implementation date shift a number of times. Finally, it looks as though the date has now settled on 1st January 2016, 2 years later than the last "go live" date of January 2014.

This is the last gasp for the regulation, it will be 2016 or nothing. Solvency II's credibility has worn paper thin over the years, any further delay would destroy it completely; so there has been (and will be) a concerted effort by European Insurance and Occupational Pensions Authority (EIOPA) and National Competent Authority(s) (NCAs) to make this stick and make this work over the next 2 years.

For the insurance industry, which has been gearing up for this over the last few years, it will spur the completion of projects, or provide impetus to awaken dormant projects suspended in more uncertain times. For the asset management industry, it will be a time to start the effort of providing the extensive data footprint required for the final January 2016 requirements and the intermediate "slimmed down" reporting required by NCAs and EIOPA during 2015.

A consistent Europe-wide approach for reporting to NCAs in preparation for the full 2016 requirements underpins the introduction of the 2015 intermediate requirements. However, even now, there is a divergence of approach, with the French allowing the use of the Extensible Business Reporting Language (XBRL) in 2014, ahead of the scheduled EIOPA developed Excel-XBRL translation tool. Hopefully, the downside of the French adopting a non-standard approach will be the shared insights of the French asset managers into the complexities of spreadsheet/XBRL translation well ahead of the deadline.

The French approach of exceeding the intermediate guidelines is in opposition to the guidance provided by the UK's Prudential Regulatory Authority (PRA) which seeks to comply with the framework without "gold plating" the requirements in order to reduce the risk of missing the timeline. Only time will tell which approach mitigates the most pain in implementing the reporting and data requirements for Pillar 3.

A note on dates: In his PRA Solvency II industry briefing of the 12th December 2013, Julian Adams (Deputy Head PRA and Executive Director of Insurance), noted that,

"We continue to think it reasonable to expect firms to be ready to provide Solvency II based reporting six months before implementation. This means that firms falling within the thresholds should be able to submit their reports in July 2015 which will be in line with the usual half-yearly financial reporting cycle for the majority of firms." (Author's bold emphasis)

Thus, if final reporting for 'as at' end 2015 data is required to be live by July 2015, working back from that date means test runs of reporting would need to be in place for end Q1 2015 at the latest. Given the extensive data footprint associated with these reports, an earlier start the better.

Therefore, if your organisation is obliged to participate in Solvency II Pillar 3 reporting, those far off dates for submitting may be much closer than you thought.

ISC has been involved in several, complex Solvency 2 projects. If you would like to share and leverage our experience, please contact us.

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