Leonidas Akritidis[/caption] [caption id="attachment_1588126" align="alignleft" width="90"] Ross Shepherd[/caption] [caption id="attachment_1588123" align="alignleft" width="90"] Hugh Skipper[/caption] In early May 2018 the UK Office for National Statistics (ONS) made a presentation to the Solvency II Wire Data User Group meeting* on the first set of statistics on the financial assets and liabilities of the UK insurance sector. The presentation followed the publication of experimental financial statistics1 on 30 April 2018, based on quarterly data collected under Solvency II as the Europe-wide insurance regulatory framework. This pioneering work by the ONS represents one of first significant steps of using Solvency II data outside of the insurance sector. In this article, Leonidas Akritidis, Hugh Skipper and Ross Shepherd, members of the ONS team that compiled and presented the work, share their insights on the data and interactions with industry.
Introduction to ONS use of Solvency II dataThe ONS, in cooperation with the Bank of England, has recently concluded that Solvency II data are suitable for UK national accounts compilation. This includes a wide range of insurance sector statistics on contribution to UK Gross Domestic Product and detailed financial statistics. Solvency II therefore has the potential to replace some existing ONS insurance surveys, which would reduce the survey compliance burden. It should be noted that Solvency II includes data from insurers that act mainly as pension fund managers. For national accounts purposes, these should not be classified in the UK insurance sector. Hence, the experimental statistics exclude approximately 11 such insurers/fund managers. The experimental Solvency II-based financial statistics for the UK insurance sector are shown in table 1.
Table 1: Assets and liabilities of the UK insurance corporations sector (in £ billion)[caption id="attachment_1588137" align="aligncenter" width="862"] Source: Office for National Statistics, Bank of England and Prudential Regulatory Authority[/caption] a) technical reserve assets (also known as reinsurance recoverables) b) net acquisition of financial assets c) estimates may not add up due to rounding d) Q1 is Quarter 1 January to March, Q2 is Quarter 2 April to June, Q3 is Quarter 3 July to September and Q4 is Quarter 4 October to December This table shows non-consolidated, non-seasonally adjusted quarterly asset and liability stocks, with selected transactions. Figures 1 and 2 (below) show the proportions of UK insurers’ assets and liabilities by type as at Quarter 4, 2016. Table 1 shows that the overall paths of total assets and liabilities increased from Quarter 1 2016 to Quarter 3 2016, followed by a fall back, after which levels were broadly stable, averaging just over £1.8 trillion.
Stocks of assetsFigure 1 and table 1 illustrate that the most important types of assets in Quarter 4 2016 were:
- debt securities (30%, £0.5 trillion), of which the majority were non-government issued
- investment fund shares/units (28%, £0.5 trillion)
- technical reserve assets (reinsurance recoverables) (15%, £0.3 trillion)
- listed and unlisted shares and equity (12%, £0.2 trillion)
Figure 1: Share of assets of UK insurers in Quarter 4 2016[caption id="attachment_1588136" align="aligncenter" width="708"] Source: Office for National Statistics, Bank of England and Prudential Regulatory Authority[/caption] There were increases between Quarter 1 2016 and Quarter 3 2016 in all the above asset types. Between Quarter 1 2016 and Quarter 4 2017 (table 1), there was a steady increase in the proportion of non-UK issued listed and unlisted share and equity assets (from 46% to 54% of total listed and unlisted share and equity) with a corresponding fall in holdings of UK issued listed and unlisted share and equity assets. Over the same period, the proportion of non-UK issued debt security assets increased slightly (from 43% to 45% of total debt securities) with a corresponding fall in UK issued debt security.
Stocks of liabilitiesFigure 2 and table 1 illustrate that the largest component of liabilities was technical reserves, which accounted for over 80% of total liabilities in Quarter 4 2016. Within this, the largest sub-category was the technical reserves for unit and index linked life insurance and pensions products.
Figure 2: Share of liabilities of UK insurers in Quarter 4 2016[caption id="attachment_1588135" align="aligncenter" width="699"] Source: Office for National Statistics, Bank of England and Prudential Regulatory Authority[/caption]