notes from September 2014 meeting

PRA Solvency II regulatory reporting industry working group, 22 September
2014
Name
Organisation
Representing
PRA/Bank of
England attendee
George Maina
Lloyd’s
Lloyd’s
Giles Fairhead Chair
Head of Department,
Retail Life and
Solvency II reporting
project lead
Jim Galbraith
Scottish Friendly
For AFM
Mattia Branca
Supervisor and
Solvency II reporting
project business
manager
Steve Dixon
Steve Dixon
Associates
For AFM
Adam McKay
Supervisor and
Solvency II reporting
project lead alternate
Tonya Coletta
XL Group
For ABI
Elzbieta
Woynowska
Reporting Policy
Olga
Yevmenchikowa
Aviva
For ABI
Joanna Rose
Regulatory Data
Group
Michael Fuller
RSA Group
For ABI
Beju Shah
Information Service
Technology Division
Colin Dixon
RSA Group
For ABI
David Coolegem
Solvency II reporting
project manager
Rebecca Wyatt
Prudential
For ABI
Sarah Antoni
Solvency II Testing
Manager
Steven Findlay
ABI
For ABI
Sylwia Ladon
Solvency II
programme
Kim Harmer
E&Y
For ILAG
Sunita Basant
Solvency II reporting
lead business
analyst
Willem van der
Westhuysen
Thomas Miller
For P&I
Clubs
Susan Wright
IMA
IMA
Apologies
Andrew Smith
XL Group
Paul Appleton
Lloyd’s
Roni Ramdin
Nick Lowe
Patricia Hakong
Russell Worsley
RSA Group
IUA
LMA
Lancashire
Group
For IUA
1
These notes are intended as a record of the discussions held at the PRA on 22 September 2014.
They are not verbatim minutes and, for the benefit of those organisations that are not members of the
industry working group, indicate the themes of the discussion and questions that were raised. The
views expressed are those of the industry members and do not represent guidance from the PRA. For
further clarification on aspects of the notes firms should contact the appropriate industry
representative.
Similarly, to raise questions and issues on regulatory reporting for discussion at the working group,
both in the preparatory phase and at Solvency II (SII) implementation, firms should address these to
an appropriate industry representative.

If firms are not represented at the working group by a member organisation they should
submit their question to: [email protected]
Notes from the meeting on 22 September 2014 covering agenda items on:
1. Progress at the PRA
1.1. High-level milestones
1.2. Update on the PRA’s data collection system
1.3. Update on industry testing
2. Progress at EIOPA
2.1 Policy Update
2.2 Taxonomy Update
3. National Specific Templates (NSTs) overview
4. Industry views on the three most pressing regulatory reporting issues
5. Q&A
6. AOB
7. Next meeting and close
2
1. Progress at the PRA
1.1 High Level Milestones
High level milestones were discussed as presented below:
1.2 Update on the PRA’s data collection system

The PRA’s vendor selection process for its data collection system is nearing completion. The
next stage will be to test and customise the system to meet the PRA’s requirements before
progressing to the industry testing phase. The PRA is on track to meet this milestone and
already has a much clearer view of the data collection system and likely look and feel.

The PRA has engaged with other European regulators to seek input on their approaches to
collections and analytics. While other regulators have selected a variety of different collection
and validation systems, there is some commonality around the chosen XBRL process.
1.3 Update on plans for industry testing

The PRA has conducted exploratory discussions since June 2014 with industry members of
the regulatory reporting industry working group, to understand firms’ readiness and
willingness to participate in a PRA testing pilot. The scope of the pilot is to test the PRA’s new
data collection system and processes before making it available to the wider range of firms
that are in scope to report in the preparatory phase.

Representatives of a number of willing firms have been identified and a newly created IT
testing sub-group of the regulatory reporting industry working group met for the first time on 6
October 2014.
3

High level plans for industry testing are:
-
Q4 2014: PRA XBRL testing
Using test XBRL files provided by firms where available
-
Q1 2015: Industry testing cycle 1
Selected firms to test the PRA web portal to trial setting-up their Solvency II
submissions, managing user profiles and uploading files, in order to provide the PRA
with feedback on usability.
-
Q2 2015: Industry testing cycle 2
All firms in scope for preparatory guidelines will be given access to the PRA web
portal and should endeavour to log-in to upload test XBRL files.
Q1: Industry members asked for further clarification on the different cycles of testing and when firms
can expect to be involved.
A1: The PRA explained that the two cycles of testing have different objectives and purposes.

Cycle 1 – which as stated above will take place in Q1 2015 – is intended to assist the PRA in
completing its user acceptance testing of the PRA’s data collection system. A small number of
firms have agreed to help the PRA to complete an end-to-end business process test of the PRA’s
new data collection system and provide feedback on usability from a firm’s perspective which will
be incorporated for the benefit of firms that will participate in cycle 2 testing. Part of cycle 1 testing
will be to prove that the PRA’s data collection system can accept and process test XBRL files
from external users.

Cycle 2 – which as stated above will take place in Q2 2015 – is targeted at those firms that are in
scope of the preparatory guidelines and must submit regulatory reporting information by no later
than 1 July 2015. Cycle 2 is considered as part of a firm’s on boarding processes to the PRA’s
new data collection system and will provide an opportunity for firms to complete their testing
processes, as well as check they are able to log-in, manage their user set-up and upload XBRL
files. The PRA will make online training and support available to firms and more information will
be made available mid Q1 2015.
o
Those firms that are not in scope of the preparatory guidelines, and will therefore submit
their first Solvency II regulatory reports after implementation in 2016, will have the
opportunity to similarly on board to the PRA data collection system in Q3 and Q4 2015.
These firms will then be able to complete their testing processes as well as check they
are able to log-in, manage their user set-up and upload files. More information will be
made available to these firms late Q2 2015.
4
2. Progress at EIOPA
2.1 Policy Update
a) Question and Answer (Q&A) processes are:

Firm queries should be addressed via the EIOPA Q&A process in the first instance. Firms are
encouraged to check the EIOPA website Q&A section to see if their questions have already been
answered.
https://eiopa.europa.eu/publications/eiopa-guidelines/qa-on-guidelines/index.html

The PRA reported that EIOPA is determined to provide a response to questions raised in a timely
manner. However, the PRA made industry members of the working group aware that any delays
to this process would primarily be due to the extensive EIOPA review process required because,
before a response can be given, all the relevant parties on the EIOPA working groups and
committees are involved to finalise it.

The PRA has published answers to questions raised via the regulatory reporting industry working
group on the Solvency II pages of the PRA section of the Bank of England’s website
http://www.bankofengland.co.uk/pra/Pages/solvency2/reporting.aspx

The PRA has set up a new mailbox for industry questions on regulatory reporting. Both industry
members of the regulatory reporting working group, as well as firms and other organisations can
submit new questions to [email protected].
o
Firms are encouraged to send their questions to EIOPA first unless questions are specific
to the UK implementation of Solvency II when they should be sent to the PRA.
o
Firms should note that the PRA cannot comment on, or answer any questions regarding a
reporting package that has not yet been published.
b) Update on reporting packages

The reporting package will be released for public consultation in set 2 Implementing Technical
Standards (ITS) and EIOPA guidelines before the end of 2014 – likely to be in late
November/early December. It is expected to contain:

‒
ITS on supervisory reporting
‒
ITS on public disclosure
‒
EIOPA’s guidelines on reporting and public disclosure, including data checks
‒
EIOPA’s guidelines on determination of market share
Discussions are still taking place at EIOPA on whether third country branches will be included in
supervisory reporting ITS or in EIOPA’s guidelines on third country branches].

Financial Stability guidelines are expected to be consulted on at the same time as the rest of the
Solvency II reporting package and are therefore expected to be published at a similar time.

The changes resulting from decisions taken on long-term guarantees measures and transitional
measures, as reflected in Omnibus II Directive, together with any changes to the Delegated Act,
will be reflected in the new package as part of set 2 ITS and EIOPA guidelines consultation.
5

EIOPA is leveraging the reporting experience acquired with CRDIV, COREP and FINDREP, to
reduce errors in the validation checks supplied in the taxonomy. The data checks are likely to be
published as guidelines, rather than part of the supervisory reporting ITS consultation; this will
make revisions of the data checks simpler to implement and firms should be prepared for
relatively regular updates.
Q2. Industry members asked the PRA to clarify whether the late November/early December reporting
package contained in the set 2 ITS and EIOPA guidelines consultation will be the final EIOPA
reporting consultation?
A2. The PRA confirmed that, to the best of its knowledge, the late November/early December
consultation on set 2 ITS and EIOPA guidelines would be the last public consultation on the reporting
package. The PRA reminded industry members that after consultation the ITS documents would be
submitted to the European Commission for approval.
Q3. Industry members asked for further information about the determination of market share
guidelines.
A3. The PRA is aware that the EIOPA guidelines are expected to provide further clarity on the cover
for determination of market share. When the EIOPA guidelines have been published the PRA will
review and provide further clarity for firms as appropriate.
Q4. Industry members asked for further information about the PRA’s approach to exemptions.
A4. The PRA is currently considering its approach to exemptions and will publish a consultation paper
before the end of 2014.
Q5. Industry members asked for further information regarding the external audit requirements for
Solvency II.
A5. The PRA confirmed that the external audit requirements guidelines are not scheduled to be
included in EIOPA’s set 2 ITS public consultation later this year. EIOPA is yet to decide the timing of a
public consultation on external audit requirements.
‒
Once EIOPA has published its guidance the PRA will consider its approach to the external
audit of Solvency II regulatory returns, if there is any flexibility for NSAs to do so,
‒
The PRA reminded firms that the current Solvency I returns are audited and that although
there is no formal requirement for an external audit of the reporting returns in the preparatory
phase the PRA is aware that some firms intend to conduct an external audit.
‒
As part of the work to review internal models and standard formula appropriateness the PRA
has published information1 on the Solvency II balance sheet, technical provisions and own
1
On 16 October 2014, subsequent to the PRA Solvency II regulatory reporting industry working group held on 22
September 2014, the PRA published information on the Solvency II balance sheet, technical provisions and own
6
Q6. Industry members asked whether there would be any changes to NSTs as a result of set 2 ITS
and EIOPA guidelines reporting package.
A6. The PRA does not expect that set 2 ITS will cause any changes to the NSTs published in
CP16/14. The PRA advised that there are several outstanding templates that relate to internal model
reporting and Lloyd’s and it is expected that further information on these templates will be published
before the end of 2014.
2.2 Taxonomy Update

The final2 Preparatory Guidelines Data Point Model, XBRL Taxonomy (version 1.5.2), test
instances and other material were released in July and are available at
www.eiopa.europa.eu/publications/solvency-ii-reporting-format/index.html

EIOPA plan a release of the Target DPM and XBRL Taxonomy for full Solvency II implementation
(1 January 2016) at the end of Q4 2014. However firms should be aware of a possible delay as
EIOPA is currently going through a procurement process.
As stated in previous industry working group meetings, this release:
-
will include a recodification of cells and correspondingly the taxonomy, including templates
included in the ITS and published for public consultation (due to begin in November /
December 2014)

is subject to change as a result of feedback from the public consultation.
EIOPA is working on documentation for Filing Rules and Guidance to help ensure XBRL
instances are created correctly. These are currently under review by member states and EIOPA
plan to release these in Q4 2014

It is likely EIOPA will release changes to the taxonomy on at least an annual basis - firms should
be prepared for such ongoing changes.

The taxonomy can only be completed once the templates are confirmed. EIOPA has recently
closed a tender process for the provision of XBRL related developments, and therefore
timescales for release of the next taxonomy may be affected by this process.
3. National Specific Templates (NSTs) overview

The PRA is consulting on a set of 11 templates as part of CP16/14 – Transposition of Solvency II
published on 11 August 2014. This consultation will close on Friday 7 November 2014.
funds review on the ‘Other Pillar 1 aspects’ page in the Solvency II section of the Bank website.
http://www.bankofengland.co.uk/pra/Documents/solvency2/balancesheetreview.pdf
2
From EIOPA website: “Further major releases of the Preparatory Solvency II DPM and XBRL Taxonomy are not
foreseen, unless outstanding issues are detected, Hotfixes will be released to solve potential minor issues.”
7
The templates being consulted on are:

‒
NS.01 With-profits value of bonus
‒
NS.02 With-profits assets and liabilities
‒
NS.03 Pools
‒
NS.04 Assessable Mutuals
‒
NS.05 Revenue account (Life)
‒
NS.06 Business Model Analysis (Life)
‒
NS.07 Business Model Analysis (non-life)
‒
NS.08 Business Model Analysis — financial guarantee insurers
‒
NS.09 Best-estimate assumptions for life insurance risks
‒
NS.10 Projection of future cash flows (Best Estimate — Non Life: liability claim types)
‒
NS.11 Non-life insurance claims information (general liability sub-classes)
As stated in A6 above the PRA advised that there are several outstanding templates that relate to
internal model reporting and Lloyd’s and it is expected that further information on these templates
will be published before the end of 2014.

Firms will not be expected to submit NSTs during the preparatory phase. In practice, the PRA
expects most firms to complete and submit only a subset of the NSTs. The PRA encourages
industry working group members to provide their NST feedback by 7 November 2014.
Q7. Members asked about the progress of the EIOPA Re-insurance Codes project
A7. The PRA understands that this project is ongoing and that in the first instance firms should use
LEI codes where available. Further information will be made available by EIOPA in the coming
months.
Q8.Industry members asked whether the PRA can confirm that National Specific Templates are
private
A8. It was confirmed that NSTs are currently private. Firms will need to start to collecting data for
NST’s in January 2016 with first submissions due in 20173.
3
For firms with a 31 December year end. Firms with a different year end will have different timescales. Please
talk to your supervisor if this is the case.
8
Q9. Industry members asked when the firms will be advised what day 1 reporting would look like.
A9. The scope of day 1 reporting requirements is specified in the Delegated Act. The format of the
submission and details of information to be submitted will be specified in set 2 ITS for supervisory
reporting due at the end November/early December.
Q10. Industry members asked for information on how the PRA will co-ordinate any ad-hoc reporting
requests for the FCA.
A10. The PRA intends to work with the FCA to ensure the Solvency II data required by them for
conduct purposes can be provided.
Q11. Industry members suggested that it would be helpful for all NSTs to be included in a single file.
A11. The PRA explained that the file format for the NSTs had not yet been finalised, but noted the
suggestion.
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4. Industry views on the three most pressing regulatory reporting issues
Issue 1: External audit of SII returns: nothing has been confirmed at a European level, but what is the
PRA expecting. This question applies equally to:
a) Regular reporting;
b) Interim reporting; and
c) IMAP.
PRA comment 1: There is no requirement for firms to have their regulatory reports audited during the
preparatory phase. However, ahead of Solvency II implementation the PRA expects IMAP firms, and
some standard formula firms, to gain some external assurance on their balance sheet and technical
provisions4. The PRA understands that EIOPA is considering whether to issue guidelines on auditing
of Solvency II reports after Solvency II implementation.
Issue 2: QRT decisions to be made by the PRA: when will the PRA decide on a) materiality levels for
IGT reporting; b) accident year vs underwriting year for certain QRTs; and c) the lines of business to
be reported for QRT TP-E7B?
PRA comment 2: By the end of November/December log files and templates should be reasonably
stable and the PRA will be able to review them to asses where supervisory judgement is required.
Therefore the PRA expects to determine its approach to these areas after the publication of set 2 ITS
and consequently hopes to be able to make firms aware of this in Q1 2015.
Issue 3: What is the PRA's stance on companies issuing announcements to the market on Solvency II
IMAP approvals before 2016, especially when some firms will have received model approval but
others might still be awaiting approval?
PRA comment 3: Internal model disclosure pre implementation of a firm’s solvency capital
requirement is a complex legal issue. The PRA will continue to consider the matter carefully in the
coming months and make internal model firms aware of its stance as appropriate.
Issue 4: Expectations for reporting of staff pension risk – given this is still an open policy area.
PRA comment 4: The PRA aims to provide further clarity concerning the treatment of defined benefit
pension schemes before the end of 2014. The PRA will clarify the position for both general and life
insurers that intend to use an internal model or the standard formula and the PRA’s expectations
relevant to the calculation of the solo and group SCR will be included.
The appropriate level of reporting is being discussed internally and will be subject to consultation in
the normal way due course.
4
On 16 October 2014, subsequent to the PRA Solvency II regulatory reporting industry working group held on 22
September 2014, the PRA published information on the Solvency II balance sheet, technical provisions and own
funds review on the ‘Other Pillar 1 aspects’ page in the Solvency II section of the Bank website.
http://www.bankofengland.co.uk/pra/Documents/solvency2/balancesheetreview.pdf
10
Issue 5: Is the PRA aware that the asset templates will not be complete for all attributes – for example
where market data (NACE codes, credit ratings etc) cannot be bought via Bloomberg etc. (e.g.
unlisted entities).
PRA comment 5. The PRA expects firms to complete all aspects of reporting. However it
acknowledges that there might be some gaps in the preparatory phase reporting. The PRA
understands that further details of external credit ratings may be available in the set 2 ITS. NACE
codes are widely available on the internet. The PRA will utilise the preparatory phase to identify any
significant data gaps to ensure complete data is received after implementation on 1 January 2016.
Issue 6: Why has the PRA decided to require that the quarterly return for preparatory phase should be
approved by the Board (as set out in the recent Q&A). The July 2012 EIOPA consultation suggested
that executive management would be able to do this and the Q&A suggests the situation for the final
returns is not certain. A Board sign-off requires a much longer lead time for completion.
PRA comment 6: During the preparatory phase the PRA expects an appropriate level of sign off. The
PRA expects the Board to take responsibility for the data submitted to the PRA; however, as with any
decision the Board makes they may choose to delegate aspects of the process for operational
reasons.
Issue 7: How do we get responses to points that need PRA sign-off? For example, approval of our
SCR template for internal models or decisions on materiality and proportionality?
PRA comment 7: After the publication of set 2 ITS at the end of November 2014 the PRA will review
materiality thresholds and proportionality and anticipates supervisors will be in position to discuss with
firms in Q1 2015. (See Issue 2 and PRA comment 2).
Issue 8: Asset Managers
•
Not many asset data requests from insurance clients, even though reporting is only 15
months away.
•
Lack of clarity of scope or defined expectations for data reporting means it is difficult to
forecast a meaningful budget
•
What are the expectations by insurance firms of their asset managers? Are they expecting
engagement in capital calculations, provision if CIC, LEI etc.?
PRA comment: The PRA is grateful for being made aware of this. The PRA explained that it was the
responsibility of the insurer to ensure they had sufficient information to complete the required
templates but it was hard to see how the insurance firms could achieve this without significant
interaction with a range of stakeholders; in particular, their asset managers.
Issue 9: Third party administrators (TPAs)
11

Lack of clarity on requirements both from the point of view of not having final version and less
than satisfactory guidance/definitions.

Interplay between completeness of data and regulator expectations. For example where a
data point is only required for reporting but is dis-proportionate in the effort to obtain what
would the regulator accept?

Data quality, assurance and potential audit requirements.
PRA comment 9: The PRA acknowledges the issue.
Issue 10: Proportionality
PRA comment 10: The regulatory principle of proportionality requires the PRA to develop and
implement rules which have a burden or restriction proportionate to the benefits which are expected
as a result. The PRA follows this principle when developing its rules and, where relevant, the PRA
sets out how its approach is consistent with the principle of proportionality.
Issue 11: Look through
PRA comment 11: The PRA is awaiting final requirements from EIOPA.
Issue 12: Reporting for binder business and practical difficulties by Managing Agents/Lloyd’s
(difficulties in getting forms completed)
PRA comment 12: The PRA committed to discuss this with members of its internal regulatory
reporting team who were closer to this issue and respond.
12
5. Q&A
Questions and answers submitted by industry representatives of the PRA regulatory reporting working
group are published on the Bank of England website at:
http://www.bankofengland.co.uk/pra/Pages/solvency2/reporting.aspx
The PRA will continue to publish updated Q&As during the preparatory phase until implementation.
6. AOB
Q12. Industry members asked for clarification on the PRA’s expectations on ring fenced funds in both
the preparatory phase and after implementation.
A12. The PRA highlighted that EIOPA has set out its expectations on ring-fenced funds in the
preparatory phase reporting package published by EIOPA in July 2014. EIOPA will set out its
expectations on ring-fenced funds after Solvency II implementation in the supervisory reporting ITS.
7. Next meeting and close
The PRA proposed that the next meeting will take place in December 2014.
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