Solvency II must do

Published by Kim Durniat on

On Tuesday 7 July we hosted our ‘Solvency II must do’ seminar bringing together experts in each of the three pillars to share with the audience the must do’s before 1 January 2016.

Kim Durniat, Partner and Head of Life Consulting, opened the session by looking at what is left to do for Pillar 1. 

Kim discussed three key areas where firms are still undertaking work:

  • Validation of the TP and SCR – where firms are still undertaking work to ensure that their TP’s are calculated in line with the Solvency II legislation and for those using the standard formula to calculate their SCR, that it is appropriate for their business.
  • Efficiency – given the reduced reporting timescales, firms are looking to refine their processes to ensure that they have efficient internal processes.
  • Approval and waivers – there are numerous waivers that firms need to apply for, however there are a number of easy wins for firms these are transitional measures for technical provisions and risk free rates, volatility adjustment and quarterly reporting exemptions.

Guest speaker Elliott Varnell, Director at Risk Actuary Advisory Ltd then picked up the baton and moved on to speak about the ORSA requirements.  The greatest area of interest and debate amongst the audience was Elliott’s proposal that the optimal length of an ORSA should be 30 pages. 

Having looked at the liability side of the Solvency II balance sheet, Scott Eason, Head of Insurance Consulting then addressed the asset side and investment issues outstanding in advance of 1 January 2016.

The key Solvency II investment requirements that Scott discussed were:

  • The requirement for written risk policies covering ALM, investment, liquidity and concentration risks.
  • The requirement for a liquidity plan.
  • The processes required by insurers independently verify market values and credit ratings provided by external third parties.

Scott also discussed how these could be implemented in a practical manner by adopting a formal process when appointing an investment manager and in regular asset data and risk monitoring.

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John Staines, CEO of Solvency II Solutions then closed the session by looking at the Pillar 3 reporting requirements, finally sharing with the audience where we are now with reporting, lessons learnt and the remaining uncertainties.  The key takeaways were:

  • Learn from the preparatory phase – there were late changes in the XBRL taxonomy and validation rules and many firms found that there XBRL validation failed.
  • A number of uncertainties remain – including external audit requirements and national discretions.

John concluded with the areas where, in his experience, companies still have work to do before1 January 2016.  These covered many of the common themes of the day including:

  • Asset data sources and licenses
  • Undertaking a full dry run within Solvency II timescales
  • Quarterly reporting exemptions 

Following the presentations a lively panel debate commenced with discussion ranging from the length of an ORSA report to the availability of asset data to complete the QRT’s.

"With less than six months to the Solvency II 'go live' date there are still a number of areas for firms to ensure compliance before 1 January 2016. These are broad ranging - from ensuring that they apply for the appropriate PRA waivers to performing a full Solvency II dry run to ensure that they can meet the required reporting timescales"