On 14 July 2015 the European Insurance and Occupational Pensions Authority (EIOPA) published a note entitled ‘Need for high quality public disclosure: Solvency II’s report on solvency and financial condition and the potential role of external audit’.
In their note EIOPA sets out that Solvency II provides a unique opportunity for the insurance industry to address the perceived weaknesses of opaqueness and inadequacy in relation to publically disclosed information and to make available high quality information to stakeholders. In addition EIOPA stresses the need to ensure that as well as being of high quality, the information is consistent and comparable to assist stakeholders and meet the goals set out by Solvency II.
EIOPA believe that to ensure high quality public disclosure external audit can be a powerful tool. They propose that the individual and group level main elements of the SFCR (the balance sheet, own funds and capital requirements) could fall within the scope of external audit.
EIOPA believes that statutory auditors are qualified to carry out this audit to arrive at a reasonable assurance opinion on the information publically disclosed. EIOPA also stress the importance of auditors issuing a public opinion and audit report on whether the disclosed elements have been properly prepared - in all material respects - in accordance with the Solvency II regulatory framework.
With the formal Solvency II audit requirements still to be confirmed, this note clearly sets out EIOPA views on the areas where external audit could provide the assurance required to ensure the transparency objective of Solvency II is fulfilled.