Published by Cherry Chan on
The biggest and most widespread Solvency II related challenge for firms in 2016 will be Pillar 3 reporting.
It’s dominated for some time but now it’s here…and it’s here to stay! So, can we finally rejoice and sit back knowing that Europe’s insurance policyholders can sleep more soundly at night? Well, not quite.
Late 2015 brought good news for the 19 firms that received full or partial model approval. Firms also got to grips with and approval for Long Term Guarantees and transitional applications, which were particularly important for certain lines of business. In addition, higher category firms participated in the (mostly) successful prep phase reporting.
For most it was an epic and hazardous but, ultimately, triumphant journey. However, we’ll have to wait for the ‘all live happily ever after’ ending to the story - for now at least. For example, remediation plans need to be addressed, every major model change will need re-approval and firms need to address differences between live and prep phase reporting.
Which aspects of Solvency II should receive some more TLC in 2016?
However, perhaps the biggest and most widespread Solvency II related challenge for firms in 2016 will be Pillar 3 reporting. The first quarterly and Day-1 reporting, due in May, should not prove to be very onerous for most. However annual quantitative reporting (QRTs and NSTs) and narrative reporting will require a lot of work. These are not required until 2017, but it would be foolish to underestimate the amount of work that might be needed to comply.
Of course not, for example, conduct and cyber risk will remain on the supervisors’ radar, Britain’s possible exit from the EU should not be ignored and individual firms or sectors will have their own issues to address. However, Solvency II will still dominate.
We know it might be slightly depressing and many may want to move on, but it will take a number of years for Solvency II to embed into BAU and be truly effective.
In 2016 we will have to tackle similar themes to those at the fore in 2015, but it isn’t quite déjà vu as the areas of focus have changed. Additionally, those firms that have limited contact with the PRA in recent years should be prepared for increased interaction as PRA focus switches from implementing regulations to supervising.
In any event, we will have plenty to keep us occupied over the next twelve months and there is a great deal of work that can be done for our industry to get real value from Solvency II in 2016.