Implementing solvency ii market event russia 2019, moscow lutz wilhelmy. Solvency ii capital calibration for securitisations. The solvency ii regulatory framework has different layers at supranational level. Solvency ii requires that the solvency capital requirement of reinsurers must be calculated on the basis of each of the underlying assets of collective investment undertakings ciu and other investments packaged as funds. Enhancing the macroprudential dimension of solvency ii. It will also add pressure on asset managers to make further.
Three strands to lookthrough know your assets requirement greater control and insight into asset portfolio allin technology solution ongoing grc requirement, unitlinked in scope. Following the lookthrough approach, investments in nonlisted real. The lookthrough requirement is also relaxed, in the sense that it becomes possible to use the reported target allocation under specific circumstances. This will allow for some flexibility in determining the rglas that qualify for equivalence with central governments. The complete package with revisions is available via ec 2018. A debt fund will invest in debt instruments real estate loans, securitisation interests, etc, but may itself be a corporate vehicle that issues shares to its investors. The mechanisms in solvency ii to address procyclical behaviour lack the symmetry needed to build up reinsurers resilience during times of excessively rising market prices, and have shortcomings in the way they apply to internal models. A full list of solvency ii firms and data from over 1,600 qrts is available to solvency ii. This includes evaluating whether their present capital, cost and tax structures are efficient and how they are likely to. Can solvency ii asset lookthrough present opportunities. The world is watching to see how the eu transforms its. Solvency ii and its implications for absolute return investing solvency ii s principlebased, risksensitive characteristics enables insurers to obtain capital relief for more efficient risktaking.
It is is not sufficient to capture all the economics characteristics of an etf, as required by the solvency ii directive. Q2 2017 financial 15% solvency i view solvency ii look through figure 4. Solvency ii impacts on the investment policy of insurers. Solvency capital requirement bscr for a life solo insurance. Solvency ii portfolio data solvency ii look through reporting requires insurers to detail their holdings across the entire investment portfolio. Solvency ii at the core of the new regulatory framework solvency ii is an economic riskbased approach, which should enable the assessment of the overall solvency of insurance and reinsurance undertakings through quantitative and qualitative measures. See technical artefacts and support on the regulatory reporting insurance sector page. Credit ratings data and look through information credit ratings are crucial for calculation of spread and default risk capital charges in relation to the scr. The commission furthermore followed eiopas advice on the simplification of the lookthrough approach, e. The general intention of solvency ii is to look through the fund vehicle to the underlying assets in order to calculate the necessary risk capital. One surprising statistic uncovered through the data research is that of the c. Executive summary the basic look through approach usually relies on the accounting positions of the financial instruments within a fund.
Following the look through approach, investments in nonlisted real estate vehicles, including funds, by insurers applying the standard model are subject to the 25%. These include solvency ii tpt, qrt, qad and various further regulatory fund reports. We also implement a look through approach to securitisation capital. Where the lookthrough approach cannot be applied, the solvency ii delegated regulation eu. In this case, we calculate solvency ii capital for pool assets and then split it between different tranches using the simplified supervisory formula approach ssfa, the. Overrides are applied to some specific types of spreadsensitive asset such as covered bonds and bonds or loans to central governments, see da article 180. Solvency ii became fully applicable on 1 january 2016, aiming to introduce a modernised riskbased prudential and supervisory regime for insurance and reinsurance undertakings in the european union. Whitepaper solvency ii and asset data november 2014. The capital requirement for debt, including real estate debt, depends on its rating and duration. Preparing for solvency ii performance article deloitte. New eu regulation effective 01012016, designed to provide greater protection to policyholders through an enhanced prudential regime better align capital requirements to the firms asset and liability profiles and enhances the quality of capital. Europe solvency ii could force asset managers to disclose their investment strategies inadvertently if brussels adopts a look through approach for pooled vehicles, state street global services has warned. The current third pillar of the solvency ii framework sets out how insurers must report their solvency.
The scr calculation according to the lookthrough approach. This includes evaluating whether their present capital, cost and tax structures are efficient and how they are likely to be affected by the directive. Product strategies under solvency ii and ifrs 4 phase ii. For asset managers and life insurers alike, the application of asset look through for investment funds held by insurers is an important consideration, which will come into effect in january 2016. Processing data for lookthrough reporting solvency ii wire. The riskier an investment, the more capital needs to be held. Impacts of solvency ii on the investment policy of insurers with the final translation, in september 2015, of the second. Introduction final report on the public consultation no.
Investment articles can solvency ii asset look through present opportunities. Under solvency ii, an insurers own risk and solvency assessment orsa incorporates a forwardlooking consideration of various macroeconomic and marketstress scenarios, for example an analysis of low for long risks, effects of qe, interest rate normalisation, inflation expectations. Advantages the alternative capital treatment is that of type ii equity. The solvency ii directive was designed to create a single market for insurance services in europe and to harmonise the. Many of the changes relate to simplifications and the application of proportionality in carrying out the solvency ii capital calculations. Review of the solvency ii implementing measures european. Regulation 201535eu the socalled delegated acts a second level measure, containing detailed measures on the new regime, recently amended by eu delegated regulation 2016467.
The essence of the directive is to require insurers to provide transparency over their risk and the levels of capital held to cover that risk. On 20 april 2016, the central bank published a brief solvency ii information note 9 entitled look through of collective investment undertakings in. The bank of england has updated the solvency ii xbrl filing manual to help firms and software vendors create xbrl instance documents for solvency ii pillar 3 reporting in light of the eiopa solvency ii taxonomy 2. Where the lookthrough approach cannot be applied to collective investment undertakings or investments packaged as funds, the scr may be calculated on the. Revision of the solvency ii standard formula approach.
European insurance undertakings have been among the most important investors in the eu, this represents about 50 percent of the total assets under management in europe and 54 percent of the european gross domestic product. Pillar iii quantitative reporting templatesqrts sinead clarke, eoin king 11th december 2012. For further information on any of the issues discussed in this publication please contact the related contacts on this page. The solvency capital requirement shall be calculat ed on the basis of each of the underlying assets of collective investment undertakings and other investments packaged as funds lookthrough approach. Framework directive 20098eu, introducing the essential principles of the new regime. Entity counterparty look through classifications asset type industrial valuation solvency ii lei lt cic nace avm type data type explanation length source from.
It is the new sol ii regulatory law an urgent internal sol ii readiness assessment is required well in advance of the solvency ii implementation date of. Cbi solvency ii matters 7 may consultation open until 19 june. The purpose of the guidelines is to adopt a consistent and convergent approach to solvency ii preparation across europe and to mitigate the risk that supervisors will adopt their own approaches at a national level. For the most part the ec carried through eiopas advice and as such our earlier briefing note remains a relevant resource for a description of the upcoming changes. Solvency ii reporting for etfs 2 club ampere 01122015 ii. Advantages the alternative capital treatment is that of type ii equity a. Solvency ii highlights the importance of the market risk. Solvency ii comes into force, the need for boards to assess the impact on the economics of their businesses and how they should respond is becoming ever more urgent. One of the challenges of solvency ii is the reporting of collective investments funds by the look through approach in s. Product strategies under solvency ii and ifrs 4 phase ii tzeping chng thomas tang. Pdf solvency ii is currently one of the most sophisticated insurance regulatory regimes in. Mapping the insurance sectors linkages to other sectors. Ii nonlegislative acts regulations commission delegated regul ation eu 201535 of 10 october 2014 supplementing directive 20098ec of the european parliament and of the council on the takingup and pursuit of the business of insurance and reinsurance solvency ii.
Solvency ii look through approach a threat to fund. The directives lookthrough principle provides insurers with exactly that capability in their asset fund holdings, and is a. Solvency ii pillar iii quantitative reporting templatesqrts. One of the difficulties this raises is the complexity of obtaining the relevant data, especially for funds of funds, where a single portfolio contains a number of funds. If the latter, consider to build a common ground which provides the. This template contains information on the look through of collective investment undertakings, or investments packaged as funds and similar undertakings, including when they are participations by underlying asset category, country of issue and currency. Solvency ii and look through what are the key impacts and challenges of look through in solvency ii. The number of solvency ii firms revisited solvency ii wire. Solvency ii reporting workshop central bank of ireland. We ensure the highest quality level of our reports with automated input and output data validations and with advanced regulatory analytics including scr computations as well as multilevel look through capabilities. Look through to instrument category and country other sectors 30% insurance investment assets nonfinancial sector 21% unit and index linked business 70% source. We look at pillars 2 and 3 in respect of the own risk and solvency. This is driven by the use of the look through approach in solvency ii and the fact that the regulatory capital cost of very shortdated assets under the market risk module which applies to the large majority of assets in a typical. What new reference data is needed for solvency ii which new data fields will be needed.
Solvency ii solvency and financial conditions report. Obtaining data and reporting according to the specific guidelines for many insurers is a difficult and challenging process. Eiopas second set of advice to the european commission on. Solvency ii is not only on the radar of insurance companies in the eu, but also on those across the globe. Central bank publishes paper on the lookthrough approach.1078 1067 515 238 817 927 868 1531 920 341 1169 1477 811 1110 506 612 97 860 785 1040 1218 1404 1242 1314 700 391 83 765