Solvency II
(i) Corrigendum to Solvency II published in the Official Journal
On the 25 July 2014, a corrigendum to the text of the Solvency II Directive was published in the Official Journal of the EU ("OJ") and relates to "obvious" errors in 23 of the different language versions of Solvency II (including the English one). The errors relate to the correlation table set out in Annex VII to Solvency II.
The corrigendum was published by the Council of the EU on 2 July 2014. Member States are required to transpose Solvency II by 31 March 2015 and the new regime will apply from 1 January 2016.
A copy of the corrigendum is available at the following link:
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:JOL_2014_219_R_0013&from=EN
(ii) Central Bank Publishes FLAOR Reporting Tool for Medium-Low and Low Impact (Re)insurance Undertakings
On 4 July 2014, the Central Bank announced the availability of the Forward Looking Assessment of Own Risks ("FLAOR") reporting tool for medium-low and low impact (re)insurance undertakings and groups. The FLAOR reporting tool had already been made available for High and Medium- High impact (re)insurance undertakings and groups.
All the (re)insurance undertakings and groups (i.e. groups where the Central Bank expects to be the group supervisor under Solvency II) are required to submit at least annually a FLAOR Report in 2014 and 2015, on or before the 31 December of each year, using the Central Bank Online Reporting System. The FLAOR reporting tool and the FLAOR Return User Manual are available at the link below:
(iii) EIOPA Updates Solvency II Data Point Model and XBRL Taxonomy Design
On 31 July 2014, the European Insurance and Occupational Pensions Authority ("EIOPA") updated its Solvency II reporting format webpage with revised information on the data point model ("DPM") and XBRL taxonomy design that have been developed in accordance with EIOPA's guidelines on submission of information to National Competent Authorities ("NCAs").
The updated webpage contains a link to the updated XBRL taxonomy (version 1.5.2). Information about how this has been updated is provided in the release notes and the taxonomy framework architecture documentation.
EIOPA has also published a test instance release package that contains a set of test cases allowing practical checks to be performed on the XBRL Taxonomy. The package is accessible from the EIOPA webpage.
EIOPA strongly recommends undertakings and software vendors to base their work only on the most recent version of the DPM and XBRL taxonomy. The previous versions published by EIOPA are now considered as outdated.
EIOPA outlines that harmonised EU-wide reporting formats are crucial to ensure a consistent implementation of the European regulatory and supervisory frameworks to support EIOPA's goal to improve the consistency and efficiency and consistency of the supervision of financial institutions practices across Europe.
EIOPA has advised that further major releases of the Preparatory Solvency II DPM and XBRL Taxonomy are not foreseen, unless outstanding issues are detected. Fixes will be released to solve potential minor issues.
The EIOPA press release may be accessed through the following link:
(iv) EIOPA Publishes Paper on Underlying Assumptions of the Standard Formula used for the Solvency II SCR Calculation
On 31 July 2014, EIOPA published a paper which sets out the underlying assumptions in the standard formula for the Solvency Capital Requirement ("SCR") calculation required under the Solvency II Directive.
The purpose of this paper is to support supervisors and firms in their application of EIOPA's Solvency II preparatory guidelines on the Forward Looking Assessment of Own Risks ("FLAOR") and, from 2016 onwards, with the guidelines on the Own Risk and Solvency Assessment ("ORSA"). In the paper, EIOPA explains that the assessment of the significance with which the risk profile of a firm or group deviates from the assumptions underlying the SCR calculation is an important process that firms and groups are required to perform from 2015. The purpose of the assessment is not to review the appropriateness or calibration of the standard formula. The standard formula for the SCR aims to capture the material, quantifiable risks that most firms are exposed to. However, it might not cover all material risks a particular firm is exposed to. For this reason, in some cases, the standard formula might not reflect the risk profile of a specific firm and, consequently, the level of own funds it needs.
The paper covers all risk modules of the standard formula, addressing the assumptions related to the risks covered by the respective modules, as well as the assumptions for the correlation between the modules. It does not address why some risks are not explicitly formulated in the standard formula. However, this does not mean that these risks do not need to be considered for the purposes of the assessment of the significance of the deviation.
The paper is divided between the assumptions per se, which are given in boxes at the start of the chapters, and background information. The assumptions outlined in the paper are those that EIOPA would expect the administrative, management or supervisory body of a firm to be aware of in order to perform its role in the FLAOR and ORSA process. The background information is intended to assist persons in assessing the significance of the deviation. In line with the general approach that the assessment of the significance of the deviation itself is left to the firm or group, the paper does not seek to prescribe explicitly the circumstances under which it would be appropriate for a firm or group to consider possible deviations of its risk profile from the assumptions on which the SCR standard formula calculation is based, or what exactly the firm or group should take into account in the assessment.
EIOPA explains that the paper reflects Solvency II and the Omnibus II Directive as well as the draft (level 2) delegated acts available at the time the paper was drafted. EIOPA also advises that the legal status of the paper is similar to the technical specifications it issued in April 2014. EIOPA informally consulted on a draft of the paper with stakeholders in spring 2014 and revised the draft following the comments received. The paper may be further amended as supervisors, firms and groups gain experience in this area.
The paper and the related press release are both available at the following links, respectively:
(v) EIOPA Launches Consultation on Guidelines for Solvency II
EIOPA has launched a Consultation on the first set of Guidelines for Solvency II and invited comments from stakeholders on same.
The Consultation have been grouped into the following topics:
- Pillar 1 Guidelines, including Guidelines on Technical Provisions, Own Funds, the Standard Formula SCR and Group Solvency;
- Internal Model Guidelines;
- Pillar 2 Guidelines, including ORSA and Governance;
- Supervisory Review Process ("SRP") Guidelines; and
- Equivalence Guidelines.
The final date for receipt of comments was 29 August 2014. The Consultation can be accessed via the link stated below:
(vi) Central Bank Conducts Survey on Preparedness for Solvency II
On 7 August 2014, the Central Bank announced that a survey on preparedness for Solvency II will be conducted in both 2014 and 2015 in order to supplement on-going supervisory engagement during the preparatory period. This survey is aimed at assessing undertakings' progress towards complying with certain guidelines on preparing for Solvency II published by the Central Bank in November 2013, the so called System of Governance and Submission of Information to the Central Bank Guidelines.
On 7 August 2014, the annual survey was issued to compliance officers of all participating undertakings. This online survey closed on 26 September 2014.
The Central Bank's press release is available via the link below:
(vii) Central Bank Publishes Q&A on Guidelines on Preparing for Solvency II
In August 2014, the Central Bank provided answers to questions posed by various stakeholders regarding the Guidelines on Preparing for Solvency II (the "Guidelines"). The document released by the Central Bank states that the Questions and Answers ("Q&A") are generally arranged under the names of Guidelines documents to which they relate.
The Q&A provided by the Central Bank deals with the following matters:
- Introduction of the Central Bank of Ireland Guidelines on Preparing for Solvency II;
- System of Governance;
- Forward Looking Assessment of Own Risks ("FLAOR");
- Submission of Information to the Central Bank; and
- Groups Aspects of the Guidelines.
However, the Central Bank has advised that this document may be updated to reflect additional Q&A during the preparatory phase, where appropriate.
The Central Bank also advises that where stakeholders have questions on these Guidelines which are not addressed in this Q&A or through the EIOPA Q&A process, they are encouraged to:
- Submit a question as part of the EIOPA Q&A process, if the question relates to EIOPA specific material, particularly the Technical Annexes of the EIOPA Guidelines on Submission of Information to National Competent Authorities; or
- Submit a question to their usual supervisory contact; or
- Submit a question to solvencyii@centralbank.ie.
A copy of the Q&A can be accessed at the following link:
(viii) Central Bank Publishes Letter on Quantitative and Qualitative Regulatory Reporting Required by Guidelines on Preparing for Solvency II
On 18 July 2014, the Central Bank published a letter regarding the "Quantitative and Qualitative Reporting" required by both the Central Bank Guidelines on Preparing for Solvency II – Submission of Information and by the Solvency II Directive.
This letter states that EIOPA has mandated the use of eXtensible Business Reporting Language ("XBRL") as the mechanism for receipt of quantitative information from the National Competent Authorities and consequently the Central Bank has mandated its use for companies reporting under the Preparatory Guidelines and Solvency II to the Central Bank. There will be no alternative submission mechanism available for these reports.
The Central Bank also advises that EIOPA is developing a Tool for Undertakings ("T4U") to assist firms in preparing the quantitative reporting in XBRL format and this is expected to become available during Quarter 4, 2014. Other tools may also be available on the market and the use of T4U or alternative tools is at the discretion of each firm.
Work on finalising the full reporting requirements under Solvency II is on-going, however the full reporting requirements are expected to be finalised and published by 30 June 2015.
A copy of the letter is available at the following link:
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