Solvency II – Reporting and disclosure

1. Solvency II – Reporting and disclosure Insurance and Reinsurance Stakeholder Group meeting 12 December 2011

2. Solvency II – Reporting and disclosure • Development process of EIOPA guidelines and standards on reporting and disclosure • General framework, objectives and means • Explanation on narrative reporting and disclosure, quantitative reporting templates, predefined events • Towards a formal opinion from the Insurance and Reinsurance Stakeholder Group

3. Development process for standards and guidelines on reporting and disclosure • Due development process: • on-going work for 2 years (solo) / 1 year (group) • large involvement of stakeholders resulted in positive feedback • detailed supporting documents - LOG files and summaries for rationale

4. Development process for standards and guidelines on reporting and disclosure • Early public consultation by EIOPA on standards and guidelines • Undertakings & supervisors need sufficient time, resources, budget planning for preparation • Necessity to stabilise the content of the templates • OMDII adaptations to scope of the standard should not prevent preparation on stable basis today.

5. General framework • Solvency II Directive contains high-level principles • Art 35 => supervisory reporting • Art. 51 to 55 => public disclosure • Art. 254 § 2 and 256 § 1 => application to groups (mutatis mutandis) • Art. 256 => single group-wide SFCR * Omnibus II => scope of Implementing Technical Standards (ITS): templates • Delegated Act provides details on content & structure of narrative disclosure & reporting, frequency & timelines • Process : CEIOPS Consultation Paper 58 (2009) => Solvency Expert Group discussions between COMandMember States, EIOPA (2010 & 2011) => Almost finalised (publication 2012)

6. General framework • Implementing technical standards • High-priority in OMBII => proposal before Dec 31st 2012 • Content of quantitative reporting templates under discussion • Process: Draft by EIOPA, adoption by COM. CP 58 (2009) => 1st round of informal consultation (2010) => 2nd round: “pre-consultation” (Q1 2011), incl. meetings with Stakeholders=> Public consultation by EIOPA started in Q4 2011 • EIOPA guidelines • Further details on narrative disclosure & reporting, pre-defined events, reporting & disclosure policies • Process: pre-consultation (Q1 2011) => Public consultation by EIOPA started in Q4 2011 => Adoption by EIOPA expected in 2012

7. Objectives of reporting in Solvency II • Regular Supervisory Reporting, the RSR • Objectives : • Micro-supervision: to perform supervisory review • Macro-supervision: to give an overall market view (aggregation & comparison of figures and trends) • Means: • Confidential and more detailed information than for disclosure No supervision without information !

8. Objectives of public disclosure in Solvency II • Solvency and Financial Condition Report, the SFCR • Objectives : • Market discipline: to encourage best practices • Market confidence: to improve understanding of business • Means : • Transparency on solvency & financial position • Explanation of methods & assumptions used Wider than current disclosure requirements in many countries!

9. Structure of narrative reporting & disclosure Similar structure of narrative RSR and SFCR to enable comparability between undertakings & between the SFCR / RSR B. Governance and remuneration policy C. Risk Profile SFCR and RSR a. Business, External Environment and performance D. Valuation for solvency purposes E. Capital management

10. Content of narrative reporting & disclosure

11. Structure of quantitative reporting templates ( “QRT”) Harmonised elements National specificities Balance sheet Variation analysis Specific regulations or activities: e.g. distribution of profits, P&I clubs, etc.; Accounting information Capital requirements (SCR / MCR) & Own funds Assets (incl. detailed list) + Technical provisions (Life & Non-Life) Reinsurance Received in locally-defined format and not automatically shared Received in a harmonised format, capable of being shared automatically with EIOPA and/or other supervisory authorities

12. Scope of QRT Group-specific Templates (non-EEA or non-insurance entities, IGT, risk concentration) Solo Templates (EEA (re)insurance entities) • General scope of group templates Group Templates Also for sub groups (when there is sub group supervision!)

13. Submission and disclosure of QRT • Submission • All templates are submitted to the supervisor • Annual for all templates and all undertakings • Quarterly for “core” solo templates, with simplified presentation & possible exemption in certain cases • Quarterly for “core” group templates • Disclosure • Public disclosure of some annual templates, within the scope of the SFCR • Does not concern quarterly templates • Possibility of simplified presentation

14. Reporting and disclosure upon occurrence of pre-defined events

15. Towards a formal opinion of the IRSG: areas of attention • Content • Quarterly reporting of the Balance Sheet: • Rationale by EIOPA: where the reconciliation reserve*cannot be explained sufficiently by the information on assets and liabilities that is reported in other quarterly templates (Assets, TP, OF)]. • Question 1 What would be the criteria for quarterly reporting of the balance sheet? See for example the threshold to be applied (as explained in the summary document of BS-C1) • * Reconciliation reserve – excess of assets over liabilities that are, to put it simply, not composed of basic own funds and from which the own shares, foreseeable dividends and distributions and ring-fenced funds have been deducted. This could, as far as this was not included in the basic own funds, include expected profits arising from future premiums

16. Towards a formal opinion of the IRSG: areas of attention Variation Analysis templates: • Developed to show various sources of changes in Basic Own funds, due to business activities, compliance with regulation or “pure” capital moves. • Attempt for compromise between the original CEIOPS position (expressed in the 2010 informal consultation) and the counter-proposal from certain stakeholders (expressed in the 2011 informal consultation): enable sufficient detail for analysis and comparability, without entailing too significant costs for undertakings in terms of implementation. • Question 2: what is the view of stakeholders on the feasibility andcomplexity of calculations, application to groups, etc.

17. Towards a formal opinion of the IRSG: areas of attention Risk Concentrationreporting through a group-specific template: • The aim of the risk concentration template: list the most important exposures by counterparty (group or/and entity) outside the scope of the re/insurance group (maximum exposure per contract and if a reinsurer fails; off balance sheet risk concentration). Only the most important exposure by counterparty should be listed. The thresholds could be fixed by the group supervisor after consulting the group itself and the College. • Question 3: Should risk concentration exposures be reporting through narrative reporting only, or supported by a specific quantitative template? What should thecorresponding guidelines contain in either case?

18. Towards a formal opinion of the IRSG: areas of attention Question 4: Are there any practical or operational issues with the application of the reporting and disclosure requirmentswhich can be identified by undertakings? If any, please describe your concerns and how they could be addressed. Impact Question 5: Do you agree with the analysis of the costs and benefits for the implementation of the reporting and disclosure requirements? Are there other costs and negative impacts EIOPA should consider? What benefits may flow from the proposed reporting and disclosure requirements? For example, what would be the potential impact of ORSA on the pricing, design and availability of insurance products, the corresponding effects for consumers and the wider social or economic impacts even if indirectly? Other?

19. Thank you!