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Solvency II and XBRL

Solvency II and XBRL. Carlos Montalvo Rebuelta 19 th XBRL International Conference, Paris, 24-6-2009. Outline. CEIOPS: work & structure Intro to Solvency II Reporting requirements XBRL consideration. CEIOPS: work & structure. Members´ Meeting. Managing Board

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Solvency II and XBRL

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  1. Solvency II and XBRL Carlos Montalvo Rebuelta 19th XBRL International Conference, Paris, 24-6-2009

  2. Outline • CEIOPS: work & structure • Intro to Solvency II • Reporting requirements • XBRL consideration

  3. CEIOPS: work & structure

  4. Members´ Meeting ManagingBoard Chair: Thomas Steffen, Germany ConsultativePanel Solvency II: Financial StabilityCommittee Kajal Vandenput, Belgium Financial RequirementsExpert Group Pauline de Chatillon, France Occupational PensionsCommittee Tony Hobman, United Kingdom Internal Governance,Supervisory Review and Reporting Expert Group Gabriel Bernardino, Portugal Consumer Protection Committee Victor Rod, Luxembourg W o r k i n g G r o u p s Internal ModelsExpert Group Paul Sharma, United Kingdom ConvergenceCommittee Raffaele Capuano, Italy Insurance Groups Supervision Committee Petra Faber-Graw, Germany Review Panel Michel Flamée, Belgium S e c r e t a r i a tSecretary General: Carlos Montalvo CEIOPS Structure

  5. CEIOPS’ main work streams Draft CEIOPS Work Programme 2009: • Insurance sector: Ongoing Solvency II workload • Occupational Pensions work • Supervisory culture, convergence and cooperation • Financial Stability, accounting and international relations • Consumer protection and market conduct • 3L3 work

  6. example CEIOPS work Input Procedures Results Balanced views Calls for Advice Meetings, deskwork, braimstormings… Additional mandates Consultation with stakeholders Workable solutions CEIOPS’ own work plan

  7. Intro to Solvency II

  8. Welcome to Solvency II...

  9. THE SOLVENCY II PROJECT • Solvency I • Framework dates from the 1970s • ‘Prudent’ valuation of liabilities reflect local accounting practices • Relatively simplistic ‘volume-based’ capital requirements • Asset risk managed by quantitative restrictions rather than capital • No provision for risk review • Solvency II • A risk oriented approach • Unified legislative basis for prudential regulation of insurers & reinsurers • Non-zero failure regime • Three pillar structure, based on Basel II • Link to IASB work • Employs Lamfalussy arrangements

  10. Quantitative requirements • Technical provisions (BE and risk margin) • 2 capital requirements (MCR and SCR –SF/IM) • Prudent person investment rule • Own funds (3 tiers) Qualitative requirements • Internal control and risk management (incl. ORSA) • Supervisory review process (qualit. & quant - Add-ons) Reporting • Supervisory reporting • Public disclosure • Market discipline Pillar 1 Pillar 2 Pillar 3 Total balance sheet approach Market-consistent valuation (fair value) Validation of internal models Focus on firm’s responsibility Convergence of supervisory practices Convergence of supervisory reporting More pressure from rating agencies, capital markets A new structure for insurance supervision Insurance supervision: solo and groups

  11. Reporting Requirements

  12. Information to be received by the supervisory authority Solvency and Financial Condition Report (SFCR) Art. 50 Publicly disclosed information -Qualitative report -Quantitative reporting templates Report to Supervisors (RTS) Art. 35(1) All information necessary for the purposes of supervision - Qualitative report - Quantitative reporting templates Art. 35(2) (a) (ii) and Art. 53(1) – upon occurrence of predefined events Art. 35(2) (a) (iii) – during enquiries regarding the situation of an undertaking Reporting requirements to the supervisors

  13. Solvency II & other reporting stakeholders Some potential reporting overlapping Solvency II: • Internal reporting, including the ORSA • IFRS/National GAAP • Tax reporting • Central banks • Central Statistical Bureau

  14. Decisions to be taken before using XBRL • Consult stakeholders • Discuss among members • Consider Impact Assessments for both industry and supervisors

  15. Challenges • Common set of information supplemented with national specificities still to be developed and agreed • Definitions and taxonomy still to be developed • Different level of previous XBRL practises among both industry and supervisors • Is it appropriate to introduce XBRL requirements together with Solvency II considering to expected workload ?

  16. Opportunities • More smoothly exchange of information between supervisors • Cross border groups benefits from standardised requirements • Easier to build centralised databases for Financial Stability objectives

  17. Risks ? • Among industry and/or supervisors some will not be able to fulfil timely reporting requirements – not appropriate especially in a crisis situation • Potential lack of XBRL experts around to develop functions • SME insurers increased burden/costs • National specificities and updates of contents are not easy to implement

  18. “ Experience is the name we give to our mistakes “.

  19. Thank you!Carlos.montalvo@ceiops.eu

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