The Solvency II Wire Quarterly is a general update on the state of Solvency II implementation as reflected in the Solvency II Wire Regular Meeting Groups (RMGs) and other Solvency II Wire activity. The RMG brings together a wide range of practitioners to discuss Solvency II and related matters. The following is a summary of the key discussion topics addressed at the meeting.
In this issue
1. Solvency II activity barometerFor the past year participants in the Solvency II Wire Regular Meeting Groups (RMGs) have been asked to rank the level of Solvency II activity in their own work (Home score) and that of their organisation or the market, as they see it (Away score). The score is on a scale of 1-10, where 10 represents 100% of the time spent on Solvency II. The chart shows quarterly figures for three metrics: average Home score, average Away score and percentage of scores of five or less (Home and Away). The downward trend of the Away scores continued in the second quarter of the year, while Home scores have picked up as the two measures continue to converge at an average slightly higher than the same time last year. The percentage of scores below 5 are also converging at just below 40% for each meeting.
2. ReportThe most significant event in 2016 Q2 was going to be the submissions of Day 1 reporting on 19 May, by all undertakings, and the first quarterly filing for those solo undertakings falling within scope on 26 May. But the results of the UK referendum to leave the EU caught most firms by surprise and will have a significant impact moving forward. Brexit – UK to seek Solvency II equivalence? for further details). Once Article 50 is triggered by the UK government (this could take as long as one year if various legal challenges are successful) the EU and UK have two years to negotiate a settlement. However, the wording of Article 50 is such that the negotiation will only relate to the exit from the EU and not the nature of the new relationship, or “model for cooperation” as officials like to call it. Until these negotiations are concluded the legal status of Solvency II, along with all other EU regulations, remains unchanged. What is clear is that uncertainty will remain for quite some time. 20 May 2017 for solo and 1 July 2017 for groups), which will include the first set of narrative as well as public disclosures. Look-Through Symposium & Solvency II Wire Quarterly 2016 Q1). More recently it has emerged that rating agencies were asking for additional fees from third parties (e.g. asset managers) who were providing Credit Quality Step (CQS) data to insurance clients. The CQS are based on external ratings used for SCR calculation and QRT reporting.
3. Readiness surveyInsights from the Thomson Reuters Solvency II Diagnostics tool (disclosure: Solvency II Wire and Thomson Reuters have entered a commercial agreement to share anonymised aggregated data from the tool). The current sample consists of close to 220 insurers, asset managers and providers of data based in Europe, and includes data collected up to the end of the second quarter of 2016.
Readiness and ORSA58% of insurers surveyed in 2016 Q2 said they believed they were ready for Solvency II; relatively little change from firms surveyed before the start of the year (61%). However, the portion of firms that believed they were not ready rose to 16% from the pre 2016 sample average of 10%. The figures for the ORSA remain consistent with last year. 68% of newly surveyed firms said they conducted an ORSA. Almost all new survey participants said they had their ORSA approved, a significant increase from the sample average of 40%.
4. External AuditThe option to request an external audit of publicly disclosed Solvency II data rests with national authorities. A Solvency II Wire survey conducted at the start of the quarter showed that only about half of the Member States would require some form of external audit of public disclosures. Yes: Austria, Belgium, Cyprus, Germany, Hungary, Netherlands, Poland, Portugal, Slovenia, Spain No: Croatia, Czech Republic, Denmark, Estonia, Finland, France, Greece, Lithuania, Latvia, Norway, Sweden, Slovakia Consulting: Ireland, Italy, Malta, UK, Gibraltar Further details of the requirements and intentions of each Member State are available on the Solvency II Interactive Implementation Map.
5. Number of internal modelsA Solvency II Wire survey has revealed that as of 1 January 2016 there were only about 95 insurance and reinsurance undertakings with an approved Internal Model (IM) or Partial Internal Model (PIM) across Europe. The survey of 25 Member States plus Norway, Iceland and Gibraltar (information from 20 NCAs showed a marked reduction from the number of firms in Internal Model Pre Application (IMAP) surveyed in 2014. [gview file=”http://www.solvencyiiwire.com/wp-content/uploads/2016/07/Internal-Models-in-Europe-3-4-2016.pdf”] Further details of the requirements and intentions of each Member State are available on the Solvency II Interactive Implementation Map.
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